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Coca-Cola and the Price of Sugar In 1985, the Coca-Cola Company was faced with soaring prices...

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Economics

Coca-Cola and the Price of Sugar In 1985, the Coca-Cola Company was faced with soaring prices for cane sugar. A 1-cent increase in the price of cane sugar raised its total cost by $20 million. Rather than raise the price, the company looked for a cheaper input and replaced cane sugar with corn sugar. Because corn was more plentiful in the United States, it was cheaper to produce. Answer the following questions: 1. Why couldn’t the Coca-Cola Company simply raise the price? 2. Is sugar a fixed or variable input? 3. Did the switch in the input lower TC? VC? FC? ATC? AFC? AVC?

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