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
?
-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

Question

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
? 
-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

Quizplus · Accepted Answer

When one producer cheats on a cartel agreement by lowering their price to increase output, the rational response for other producers is to also decrease their price. This is because they need to remain competitive and protect their market share. If they do not adjust their prices, they risk losing customers to the producer who has lowered their prices.

The Diagram Below Illustrates the International Tin Market