A Sept 14, 2014 BloombergBusiness article on pear production in Europe reported[
ID: 1103900 • Letter: A
Question
A Sept 14, 2014 BloombergBusiness article on pear production in Europe reported[1]:
Bas Feijtel has a bumper crop of pears and no place to sell them all, so he’s leaving a quarter of them to rot. That’s because the price he gets for his pears plunged 70 percent from last year after Russia’s food import ban, and the grower in Wemeldinge, Netherlands, says it’s cheaper not to harvest any but the most perfect fruit....“Picking costs are quite high in northwestern European countries, so I can imagine some of them will leave the pears in the fields, but it’s also an enormous waste,” van Rijswick (a fresh produce analyst at Rabobank International in Utrecht, Netherlands) said.
[1] “Europe’s Pears Rot as Putin Retaliation Pushes Down Price,” BloombergBusiness, Sept 14, 2014.
Assume this market is competitive. What does the article suggest about the short-run price and costs of picking and selling the less-than-perfect pears for the many farmers who leave the less-than-perfect pears to rot in the field?” (Pick the single best/correct answer.)
The price that they could receive for the less-than-perfect pears is lower than their average variable cost.Explanation / Answer
Option A is correct
The price that they could receive for the less than perfect pears is lower than their average variable cost (P < shutdown price, therefore, it is costly to harvest such pears)