Suppose that a roadside orange stand in Florida charges $1 for a bag of "standard" oranges and $2 for a bag of "premium" unblemished oranges, which are guaranteed to be perfectly ripe. In Montana, consumers must pay $3 per bag to transport FL oranges to their local grocery stores. Assume the transportation cost is the same whether the trucker is sending standard or premium oranges. Based on this information, answer the following questions.
1.Write a sentence that explains the cost of a bag of premium oranges in terms of a bag of standard oranges in Florida?
2. Do consumers in Montana face the same relative costs as a consumer in Florida? If not, what relative costs do consumers in MT face and why?
3.True/False/Explain. A consumer in Florida gives up more standard oranges to consume a premium orange than a consumer in Montana?
4.Where is the relative demand for premium oranges higher - FL or MT? Explain. Hint: relative demand is linked to relative prices?
5.If you were a profit maximizing orange producer in FL, would you send an orange truck destined for MT loaded with more premium oranges or more standard oranges? Explain using key economic principles.