The example of "fairtrade" coffee illustrates the
Problem of trying to stabilize returns to specific factors.
What is the problem?
A)Production is inherently egalitarian-all resources get the same return.
B)When coffee prices rose, as a result of the price stabilization efforts, the specific factors' incomes would
Have risen disproportionally, yet the fairtrade contracts
Provided a smaller increase.
C)When coffee prices fell, the farmers sold their plots and sought employment in other industries.
D)Fairtrade efforts are unpopular among U.S. workers, who see imports increase and their returns
From coffee production fall.

Question

The example of "fair­trade" coffee illustrates the
Problem of trying to stabilize returns to specific factors.
What is the problem?
A)Production is inherently egalitarian-all resources get the same return.
B)When coffee prices rose, as a result of the price stabilization efforts, the specific factors' incomes would
Have risen disproportionally, yet the fair­trade contracts
Provided a smaller increase.
C)When coffee prices fell, the farmers sold their plots and sought employment in other industries.
D)Fair­trade efforts are unpopular among U.S. workers, who see imports increase and their returns
From coffee production fall.

Quizplus · Accepted Answer

The problem with trying to stabilize returns to specific factors is that it can lead to disproportionate increases or decreases in incomes for those specific factors. In the case of fair-trade coffee, the price stabilization efforts led to higher coffee prices but the fair-trade contracts provided a smaller increase, which meant that the incomes of coffee farmers did not rise as much as they should have. This creates a problem of fairness and equity in how the benefits of price stabilization efforts are distributed.

The Example of "Fair­trade" Coffee Illustrates the

The Example of "Fairtrade" Coffee Illustrates the