Perfectly Competitive Business Decisions: Orange Juice

Related BrainMass Solutions

• Budget Constraint, Substitutes, Complements,Indifference Map

  (B) The bundles includes 8 ounce frozen orange juice and 12 ounce frozen orange juice These are perfect substitutes because 8 ounces of frozen orange juice can substitute perfectly for 12 ounce frozen orange juice.

• Industry meets conditions of a perfectly competitive market

  This is true, for example, when Florida has a freeze that reduces the orange crop. In that case, the price of orange juice usually increases, but it may not increase at the level of the grower and buyer.

• Output Decision Making

  In general, commodity markets and markets of raw materials move very close to being perfectly competitive.

• Analyzing demand and supply behavior in the given situations

  Generally speaking, orange juice and soft drinks are good substitutes. So, an increase in prices of orange juice should increase the demand of soft drinks. There will be shift in demand curve for soft drinks. Demand should increase.

• Applications of Demand and Supply: Various Questions

  Substitutes for orange juice in general are apple juice and different types of juices, soft drinks, etc., Substitutes for a particular brand of juice are all of the substitutes of orange juice mentioned before + all other brands of orange juice.

• Fruit Juice, Inc.: What is the indirect cost rate per truck trip when (a) budgeted costs and budgeted quantities (trips) are used and (b) actual costs and actual quantities (trips) are used?

  This enables it to make operating decisions knowing the rate it will have to pay for transportation. In contrast, when actual costs/actual quantities are used, the Orange Juice Division must wait until year-end to know its transportation charges.

• Factors in a cost volume profit analysis

  This is very common with orange juice and when devastating weather hits in Florida, because most of our oranges come from Florida for orange juice production.

• Future Contract choices for hedging price of frozen orange juice

  Smith could lock in her orange juice costs with a May frozen orange juice futures contract trading in January. 2. Assume on January 1, the orange juice price on the spot market is $0.91/lb.

• Supply curve for orange juice

  The expert examines the supply curve for orange juice.