plogod wrote:
My problem with A is that the corn syrup may have been more expensive than the sugar pre import-tax. How can we just assume they are nearly the same?
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Lets explore option (A)
Quote:
The amount of cane juice required to sweeten one soft drink cost approximately the same as the amount of high fructose corn syrup required to sweeten one soft drink prior to the imposition of the cane juice import tax.
Let Price of sugar cane juice prior to imposition of taxes be $10/unit
Quantity required for production of one soft drink be 5 units
So, prior to imposition of taxes cost of production of one soft drink using sugar cane juice is $ 50
Government imposes say 10% tax (say)
Price of sugar cane juice after imposition of taxes will be $11/unit
Quantity required for production of one soft drink be 5 units
So, prior to imposition of taxes cost of production of one soft drink using sugar cane juice is $ 55
Quote:
Since cost has increased soft drink companies of the country decide to use corn syrup instead of sugar cane juice to maintain cost same.
Here I assume 2 things -
1. Quantity of syrup required for production of one soft drink doesn't change.
2. Cost of sugar cane per unit will be at most equal to the cost of sugar cane juice prior to imposition of tax.
Cost of corn syrup prior to imposition of taxes be $10/unit
Quantity required for production of one soft drink be 5 units
So, prior to imposition of taxes cost of production of one soft drink using sugar cane juice is $ 50
Now go to option (A) once again -
Quote:
The amount of cane juice required to sweeten one soft drink cost approximately the same as the amount of high fructose corn syrup required to sweeten one soft drink prior to the imposition of the cane juice import tax.
Check carefully this clearly matches our assumptions highlighted in red and blue above, hence (A) is correct.
Now the last part , your query -
My problem with A is that the corn syrup may have been more expensive than the sugar pre import-tax. How can we just assume they are nearly the same?The stimulus states -
Quote:
all the country's soft drink companies, which had before used cane juice as a sweetener in their drinks, switched to another sweetener, high fructose corn syrup, in order to maintain their cost structures.
If we assume that cost of corn syrup is more expensive than more expensive than the sugar pre import-tax, then the soft drink companies would not be able to maintain their cost structures same and the entire argument of switching to corn sugar from sugar cane juice falls apart.Hope this helps, please feel free to revert in case of any doubt.