1.5. In early 2000, sugar prices were severely depressed, falling below 18 cents a pound for raw cane sugar. Sugar producers received loans from the government, putting up their sugar as collateral at 18 cents a pound. (LO8W-3)

a. If sugar prices fall below 18 cents a pound and there are no consequences of default other than forfeit of collateral, what would a sugar producer do if the market price of sugar is 16 cents a pound? Demonstrate graphically.

b. Assuming the government ends up with the sugar, what three options does the government have for dealing with it and what is a problem with each option?

c. What would you predict would happen to the sugar lobby’s spending on lobbying efforts during this time?

d. What lobbies might be fighting against this support program?