The example of fair-trade 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 world coffee prices rise farmers of fair-trade coffee may receive a lower price than that offered on the world market.
C) When coffee prices fall, the farmers will sell their plots and seek employment in other industries.
D) Fair-trade efforts are unpopular among U.S. workers, who see imports increase and their returns from coffee production fall.

Question

Quizplus · Accepted Answer

The problem with fair-trade coffee is that even though it is meant to stabilize returns for farmers, they may actually end up receiving a lower price than what is offered on the world market when global coffee prices rise. This ultimately defeats the purpose of fair-trade efforts.

The Example of Fair-Trade Coffee Illustrates the Problem of Trying