Assume that a group of countries that produce 50 percent of the world's coffee decide to limit their coffee production and exports to increase their income from the sale of coffee.Which of the following are necessary for this cartel to operate successfully?
A)The world demand for coffee should be price elastic and the supply of coffee by other coffee producers should be price inelastic.
B)The world demand for coffee and the supply of coffee by other producers should be price inelastic.
C)The world demand for coffee and supply of coffee by other coffee producers should be price elastic.
D)The world demand for coffee should be price inelastic and supply of coffee by other coffee producers should be price elastic.

Question

Quizplus · Accepted Answer

For a cartel to successfully increase income by limiting production, the demand for their product (coffee, in this case) must be price inelastic, meaning consumers will continue to buy coffee even if the price increases. Additionally, the supply of coffee by other producers must also be price inelastic, ensuring that these other producers cannot easily increase their supply to fill the gap, thus allowing the cartel to maintain higher prices and increase their income.

Assume That a Group of Countries That Produce 50 Percent