case study with questions

Andrea Illy is CEO of the global premium coffee company that bears his family's name. As one might expect, he is passionate about coffee - its science, its health benefits, its taste, its beauty. Illy also has a dream that someday soon the coffee market might be transformed into something approaching the market for wine. Where connoisseurs discuss the fine points of various origin coffees and blends, where customers are willing to pay a premium for the finest examples of the coffee-making art, and where the growers, roasters and baristas will be compensated fairly for the expertise they contribute to every cup.

Unfortunately, the current coffee market differs from such an ideal. Coffee growers in most parts of the globe work at a barely subsistence level. One bad harvest (made all the more likely by the ravages of climate change) or a sudden decline in the commodity price of coffee can drop them below subsistence to hunger. Even in good times, growers have little incentive to improve their operation - they have minor contact with the roasters or customers and no knowledge of how their crops get translated into the cup. This disadvantages not only the grower but also the consumer - coffee sourced from good quality beans is hard to find.

lly believes that the solution to the sad state of affairs is to initiate a "virtuous circle" that draws the grower, the roaster, the barista and customer together. Growers with better knowledge of the market will work to improve their crops or experiment with new varieties. Roasters and preparers will educate their customers as to the qualities of various beans, roasts and preparations. Customers, in turn, will be willing to pay more for the best beans and that premium will be sent back up the chain to pay for even more quality and variety. And so on.

Certainly there have been some positive signs. Indeed, many observers argued that a "third-wave" of transformation in the coffee market was already starting. (The first wave is said to have occurred when Maxwell House and Folgers made coffee a mass commodity, the second wave when Starbucks initiated a move to quality and higher prices.) Specialty coffee roasters had worked to build cafes and brands around origin-based beans sold directly to the roasters without reference to the commodity prices of coffee. With these third-wave roasters, every coffee came with a story of its origins and growers could count on occasionally eye-popping premiums for their beans. Andrea Illy is CEO of the global premium coffee company that bears his family's name. As one might expect, he is passionate about coffee - its science, its health benefits, its taste, its beauty. Illy also has a dream that someday soon the coffee market might be transformed into something approaching the market for wine. Where connoisseurs discuss the fine points of various origin coffees and blends, where customers are willing to pay a premium for the finest examples of the coffee-making art, and where the growers, roasters and baristas will be compensated fairly for the expertise they contribute to every cup.

Unfortunately, the current coffee market differs from such an ideal. Coffee growers in most parts of the globe work at a barely subsistence level. One bad harvest (made all the more likely by the ravages of climate change) or a sudden decline in the commodity price of coffee can drop them below subsistence to hunger. Even in good times, growers have little incentive to improve their operation - they have minor contact with the roasters or customers and no knowledge of how their crops get translated into the cup. This disadvantages not only the grower but also the consumer - coffee sourced from good quality beans is hard to find.

lly believes that the solution to the sad state of affairs is to initiate a "virtuous circle" that draws the grower, the roaster, the barista and customer together. Growers with better knowledge of the market will work to improve their crops or experiment with new varieties. Roasters and preparers will educate their customers as to the qualities of various beans, roasts and preparations. Customers, in turn, will be willing to pay more for the best beans and that premium will be sent back up the chain to pay for even more quality and variety. And so on.

Certainly there have been some positive signs. Indeed, many observers argued that a "third-wave" of transformation in the coffee market was already starting. (The first wave is said to have occurred when Maxwell House and Folgers made coffee a mass commodity, the second wave when Starbucks initiated a move to quality and higher prices.) Specialty coffee roasters had worked to build cafes and brands around origin-based beans sold directly to the roasters without reference to the commodity prices of coffee. With these third-wave roasters, every coffee came with a story of its origins and growers could count on occasionally eye-popping premiums for their beans.

1. In a short-run _______ development_________, the marginal cost is rising and the average adjustable cost is falling as productivity is snowballing. Consequently,

2. For a firm _________ in a textbook market________, its short-run stock is identical with the growing arm rest of_______

3. In a consumer product Edgeworth box, a situation on the ________ curvature

4. In order to stem methodically the magnitude of any single consumer good's Edgeworth box, we need to distinguish

5. A movement _______from A to C characterizes

6. In a Bertrand duopoly, each thespian tries to__________

7. In a cartel, the enticement ________to cheat is noteworthy for the reason that

8. When firms in monopolistic competition are earning an economic profit, firms will

9. In order to be self-enforcing,______- an oligopoly approach must_________--

10. A monopolist _________ appearances a downward-sloping demand curvature since

11. Explain the relationship between costs in the short run and costs in the long run. In your answer define what the "short run" means.

12. List two factors that affect how price-elastic demand for a particular good is at a moment in time and explain

13. Define what is a long-run equilibrium in a perfectly competitive, endowment economy.

14. Rank the following market structures in terms of the highest equilibrium price to the lowest: perfect competition, Stackleberg competition, monopoly, Cournot competition, Bertrand competition, shared monopoly