Multiple Choice
The diagram below illustrates the international tin market. Assume that the producing and consuming countries establish an international commodity agreement under which the target price of tin is $5 per pound.
Figure 7.2. Defending the Target Price in Face of Changing Supply Conditions
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-Consider Figure 7.2.Assume there exists a cartel of several producers that is maximizing total profit.If one producer cheats on the cartel agreement by decreasing its price and increasing its output, then the rational action of the other producers is to
A) increase their price in order to regain sacrificed profits.
B) decrease their price as well.
C) continue selling at the agreed-upon price.
D) give the product away for free.
Correct Answer:
Verified
Correct Answer:
Verified
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