The diagram below illustrates the international tin market. Assume that producing and consuming countries establish an international commodity agreement under which the target price of tin is $5 per pound.

Figure 7.1. Defending the Target Price in Face of Changing Demand Conditions

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-Consider Figure 7.1.Suppose the demand for tin decreases from D₀ to D₂.Under a system of export quotas, the tin producers could maintain the target price by

Question

The diagram below illustrates the international tin market. Assume that producing and consuming countries establish an international commodity agreement under which the target price of tin is $5 per pound.

Figure 7.1. Defending the Target Price in Face of Changing Demand Conditions

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-Consider Figure 7.1.Suppose the demand for tin decreases from D₀ to D₂.Under a system of export quotas, the tin producers could maintain the target price by

Quizplus · Accepted Answer

When the demand for tin decreases, the producers need to decrease the quantity of tin supplied to maintain the target price. Looking at the graph, we can see that a decrease in demand from DS1U1B10S1U1B0 to DS1U1B12S1U1B0 would result in a shift of the supply curve to the right. To maintain the target price, the supply curve needs to shift back to the left, which can be achieved by decreasing the quantity of tin supplied by 30 pounds (moving from S1U1B10 to S1U1B9). Therefore, option D is the correct answer.

The Diagram Below Illustrates the International Tin Market