The collapse of the Francis Scott Key Bridge into the Patapsco River in Baltimore on Tuesday, March 26, 2024, is expected to cause significant disruptions to shipping operations. Baltimore's port, renowned as one of the most critical ports in the USA, is responsible for handling the largest volume of sugar shipments. In the aftermath of this incident, the port has been temporarily closed, necessitating alternative shipping routes for sugar shipments. Consequently, sellers are facingincreased transportationcosts due to the diversion of shipping routes.

i) Assume that the market for sugar is perfectly competitive. Using a supply and demand model, illustrate the equilibrium price and quantity of sugar before the incident in the USA.(2 marks)

ii) On your graph, indicate the size of Consumer Surplus (CS), Producer Surplus (PS), and total Economic Surplus (TS) in this market at equilibrium. Label the areas representing CS, PS, andTS on the graph.(3 marks)

iii) Whatthreetests/characteristics do economists look for when determining if a market is perfectly competitive?(3 marks)

iv) How important is spending on advertising in a perfectly competitive market? Briefly explainyour answer.(2 marks)

v) Redraw your diagram and demonstrate the impact of this incident on the equilibrium price and quantity of sugar.(4 marks)

vi) Is the new equilibrium at an efficient level? Does theimpact of this incident on price create any Deadweight Loss (DWL)? Briefly explain your answers.(2 marks)

vii) Now,suppose that alongside theabove-mentioned incident, this market experiences a negative demand shock, leading to a decrease in demand for sugar. Using your graph, analyse thesimultaneous impact of these two shocks on the equilibrium quantity and price of sugar.(4 marks)