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Suppose That Two Types of Indistinguishable Coffee Beans Are Imported

Question 117

Multiple Choice

Suppose that two types of indistinguishable coffee beans are imported to the U.S.: those grown in the mountains of South America and those grown in greenhouses in Canada.Mountain grown coffee produces a better tasting coffee,but buyers cannot distinguish the beans by sight or smell.Only the importers know the source of the beans.Buyers value mountain grown beans at $10 a pound and greenhouse grown beans at $3 a pound.Assume that 70% of imported beans are mountain grown,and 30% are greenhouse grown.
Suppose that no mountain-grown beans are imported because buyers are worried that they might end up with Canadian beans.To counteract this problem,bean importers allow buyers to taste a cup before purchasing their beans.As a result,


A) Canadian beans will not sell at all.
B) mountain grown beans will not sell at all.
C) both kinds of beans will sell for the same price.
D) mountain grown beans will sell for a higher price than Canadian beans.

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