To be considered a good candidate for an export cartel, a commodity should
A) be a manufactured good.
B) be a primary product.
C) have a low price elasticity of supply.
D) have a high price elasticity of demand.

Question

Quizplus · Accepted Answer

A commodity that is a primary product and has a low price elasticity of supply is a good candidate for an export cartel. This is because a low price elasticity of supply means that producers cannot easily increase output in response to higher prices, which makes it easier for a group of producers to control the market and maintain high prices. Portugal's steel market in Figure 8.2 demonstrates this concept, as the country's producers were able to form an export cartel and maintain high prices due to limited competition and a low price elasticity of supply.

To Be Considered a Good Candidate for an Export Cartel