Harvested and Ready to Export, Bananas Bound for Russia Have Nowhere to Go

The WSJ (March 2022) reports that an embargo of bananas to Russis and gridlock at ports has created a "glut" of bananas. "Consider this quote: "With a glut on the market that has sharply lowered prices, many farmers are leaving bananas to rot in the fields—low prices don’t cover the cost of production." Which cost is price below, average variable cost or average total cost?

Frackers Push Into Once-Dead Shale Patches as Oil Nears $100 a Barrel

The WSJ (Feb. 2020) reports: "Spurred by the highest oil prices in years, shale companies are moving drilling rigs back into oil fields that were all but abandoned a few years ago."

Shortage or scarcity or supply constraints

 

"Intel Corp.’s INTC 1.15% new chief executive said a global chip-supply shortage could stretch two more years". (WSJ, April 2021) Here are questions.

1. Are chips scarce?
2. Does a shortage of chips exist?
3. What is the difference between a shortage and scarcity?
4. If a shortage exists, why doesn't an increase in price eliminate it?
5. What is the difference between the short run and the long run?
6. In which time periods, the short or long runs, can firms "put more capacity on the ground"?
7. Are the manufacturers earning more than a normal rate of return?
8. If firms are not earning more than a normal rate of return, why does Intel want to increase capacity?
9. Could automobile manufacturers have avoided shutting down by paying a premium to purchase the chips they need to maintain production?
10. Why would automobile manufacturers shut down instead of paying a premium to purchase the chips they need to maintain production?

Small drillers are turning off the tap because of low oil prices (WSJ, April 2020). Here is a money quote: "Better to keep oil in the ground than lose money selling it at current prices." When does the rig "lose money", when price is below average total cost or below average variable cost?