Brazil is the world's largest sugar cane producer and sugar cane can be used for producing sugar and the fuel ethanol for automobiles. Which sequence of events is correct?
A) Rising oil prices cause Brazilian producers to shift sugar cane production from sugar to the fuel ethanol. The decrease in sugar supply raises the price of candy bars.
B) Rising oil prices cause Brazilian producers to shift sugar cane production from the fuel ethanol to sugar. The increase in sugar supply decreases the price of candy bars.
C) Falling oil prices cause Brazilian producers to shift sugar cane production from sugar to the fuel ethanol. The increase in sugar supply raises the price of candy bars.
D) Falling oil prices cause Brazilian producers to shift sugar cane production from the fuel ethanol to sugar. The increase in sugar supply raises the price of candy bars.

Question

Quizplus · Accepted Answer

Rising oil prices make fuel ethanol relatively more attractive compared to sugar production. Hence, Brazilian producers shift their production to fuel ethanol. The decrease in sugar supply leads to an increase in the price of candy bars due to higher production costs.

Brazil Is the World's Largest Sugar Cane Producer and Sugar