The market for avocados in Santa Cruz has 5 local producers and 5 local "consumers" (each is actually a restaurant). Each producer can produce 1 avocado, and each consumer demands 1 avocado. The producers and consumers are: Table 1: Producer Cost |Amy's Farm $15 Ostrich Farm $6 Knott's Farm $14 Fambrini's Farm $9 JSM Organic Farms $10 Table 2: Willingness Consumer to pay Cafe Ivita $4 Avanti's $1 El Palomar $10 Olita's $9 Vim $5 3. Each of the five consumers of guacamole is also an employer in the (labor) market for guacamole chefs. Each employer's marginal product of labor (MPL) depends on whether it buys an avocado, its willingness to pay for an avocado (WTP, as in Table 2 above), and the price P it pays (your answer to 1c and 2c). The formula is S 4+ (WTP – P) if it buys the avocado MPL = otherwise 2. The U.S. government, arguing that avocados are a strategically important good, imposes a $5 tariff on avocados. After the tariff is imposed... There are 5 workers: Table 3: a) How many domestic consumers buy avocados? Willingness-to- Name • b) How many domestic producers sell avocados? accept Ziyu c) The price paid by domestic consumers is $ per avocado Yifei 4 Roberto d) Fill in the blanks: Santa Cruz will |(import/export) Bhavyaa Miguel avocados e) The cost of the tariff to Santa Cruz is $ • a) Before the tariff, workers are hired at a wage of $ b) The tariff causes jobs to be lost • c) Politicians sometimes argue that raising tariffs will protect American jobs. Given your answers above, explain why that argument may not necessarily be true. N LO

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