MULTIPLE CHOICE*

In 1980, Brazil was a major player in the international coffee market, supplying more than 60% of the world's coffee. In 1982, a sudden drought in Brazil reduced the country's coffee supply, leading to an increase in the world price of coffee. Mark the (unique) correct answer. You don't need to motivate your answer.

1. How did the welfare of the average Brazilian consumer change between 1980 and 1982?

(a) Welfare increased

(b) Welfare decreased

(c) Welfare was unaffected (

d) The effect on welfare was uncertain

Since the 1990s, the Brazil market share in the world market steadily declined due to new supplying countries such as Vietnam that increased global production. Let p T denote the world (relative) coffee price. [Note: the answer to the following questions does not depend on the previous answer]

2. How did p T change following the surge in Vietnamese coffee exports?

(a) p T (

b) p T

(c) p T didn't change

(d) The effect on p T was uncertain

3. How did the welfare of the average Brazilian consumer change between 1980 and 1990s due to the surge in Vietnamese coffee exports?

(a) Welfare increased

(b) Welfare decreased

(c) Welfare was unaffected

(d) The effect on welfare was uncertain