You are the manager of a firm that produces and markets a generic type of soft drink in a competitive market. In addition to the large number of generic products in your markets, you also compete against major brands such as Coca-Cola and Pepsi. Suppose that, due to the successful lobbying efforts of sugar producers in Ghana, government is going to levy a $0.50 per pound tariff on all imported raw sugar – the primary input for your product. a. How will this event impact on the equilibrium price and quantity of soft drinks? Explain (Supplement your answer with illustrations) b. In addition, suppose that Coke and Pepsi plan to launch an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks. How will this event impact on the equilibrium price and quantity of soft drinks?
You are the manager of a firm that produces and markets a generic type of soft drink in a competitive market. In addition to the large number of generic products in your markets, you also compete against major brands such as Coca-Cola and Pepsi. Suppose that, due to the successful lobbying efforts of sugar producers in Ghana, government is going to levy a $0.50 per pound tariff on all imported raw sugar – the primary input for your product. a. How will this event impact on the equilibrium price and quantity of soft drinks? Explain (Supplement your answer with illustrations) b. In addition, suppose that Coke and Pepsi plan to launch an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks. How will this event impact on the equilibrium price and quantity of soft drinks?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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You are the manager of a firm that produces and markets a generic type of soft drink in a
competitive market. In addition to the large number of generic products in your markets,
you also compete against major brands such as Coca-Cola and Pepsi. Suppose that, due to
the successful lobbying efforts of sugar producers in Ghana, government is going to levy a
$0.50 per pound tariff on all imported raw sugar – the primary input for your product.
a. How will this event impact on the equilibrium price and quantity of soft drinks? Explain
(Supplement your answer with illustrations)
b. In addition, suppose that Coke and Pepsi plan to launch an aggressive advertising campaign
designed to persuade consumers that their branded products are superior to generic soft
drinks. How will this event impact on the equilibrium price and quantity of soft drinks?
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