Home > Microeconomics > Chocolate Producers and Long-Term Exit

Chocolate Producers and Long-Term Exit

Someone’s worried about cocoa farmers getting such low returns for their work that they are choosing to stop producing, driving up prices.

Farmers in the countries that produce the bulk of cocoa bought by the multinationals who control the market have found the crop a bitter harvest. The minimal rewards they have historically received do not provide incentives for the time-consuming work of replanting as their trees die off.

Not to minimize the pain to individual farmers, seems like this is exactly what should happen when costs (“the time-consuming work”) exceed the “minimal rewards.” The exit of marginal producers should restore equilibrium at higher prices to remaining producers.

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Categories: Microeconomics
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