# Economics and Brazilian Shrimp Farmers

Summary

This week’s readings covered various topics in microeconomics, including producer-consumer rivalry, opportunity cost, accounting and economic profits, and the five forces framework for analyzing industries. One of the headlines discussed in class was about Amcott losing \$3.5 million, resulting in the firing of a manager. Another news article mentioned Southwest Airlines launching a bags Fly Free campaign that charged no fees for a first and second checked bag, which was an example of producer-consumer rivalry. In one of the homework questions, we were asked to calculate the maximum amount we would pay for an asset that generates an income of \$250,000 at the end of five years, considering the opportunity cost of using funds is 8 percent. Additionally, we had to analyze the various rivalries depicted in a scenario involving Brazilian shrimp farmers and the Southern Shrimp Alliance and apply the five forces framework to the industry. Lastly, we were given a question about Jaynet, who spends \$30,000 per year on painting supplies and storage space and turned down job offers to continue her painting career. We had to calculate her accounting and economic profits based on her selling 25 paintings per year at a price of \$8,000 each.

Table of Content

This week, you are required to read Chapter 1 and the headline “Amcott Loses \$3.5 Million: Manager Fired.” Once done, please respond to Question 1 on Page 27:

Question 1 – Page 27:

Southwest Airlines has introduced a “bags Fly Free” campaign in which they waive charges for the first and second checked bags. Which of the following options most accurately characterizes this situation: a) Producer-producer rivalry, b) Consumer-consumer rivalry, or c) Producer-consumer rivalry?

Bottom of Form

Question 2. Page 27

What is the maximum amount you would pay for an asset that generates an income of \$ 250,000 at the end of five years of the opportunity cost of using funds is 8 percent?

Question 8 page 28
Jaynet spends \$30,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm- one offer was for \$110,000 per year, and the other was for \$80,000. However, she turned both jobs down to continue a painting career.

If Jaynet sells 25 paintings per year at a price of \$8,000 each:

b. What are her economic profits? Show your work!

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Question 21 can be found on page 32.

Over the past decade, Brazil has experienced significant growth in its shrimp exports, increasing from 400 tons to over 58,000 tons. Approximately one-third of these exports are shipped to the United States. However, Brazilian shrimp farmers may face a potential obstacle due to claims made by the Southern Shrimp Alliance, an organization representing countries involved in shrimp production. According to their allegations, the United States is selling shrimp at prices below fair market value. To address this concern, they propose implementing a 300 percent tariff on all imported shrimp. In response to these accusations, Brazilian producers and other countries mentioned in the complaint argue that they possess competitive advantages such as lower labor costs, affordable land availability, and a favorable climate that allows for higher yields and three annual harvests. Remarkably enough, even the American Seafood Distributors Association—representing supermarkets, shrimp processors and restaurants—supports foreign producers by asserting that it is actually the Southern Shrimp Alliance engaging in unfair trade practices.

a) The scenario illustrates different rivalries, while b) the industry is analyzed using the five forces framework.

Instructions for the Home Assignment/Drop Box:

The homework should be submitted in the Drop Box by 5pm on Saturday. It can be sent as a Word attachment or copied and pasted into the Drop Box.