Figure 7.2. Defending the Target Price in Face of Changing Supply Conditions

-Consider Figure 7.2.Suppose the supply of tin increases from S? to S?.Under a buffer stock system,the buffer-stock manager could maintain the target price by:
A) Purchasing 15 pounds of tin
B) Purchasing 30 pounds of tin
C) Selling 15 pounds of tin
D) Selling 30 pounds of tin

Question

Figure 7.2. Defending the Target Price in Face of Changing Supply Conditions
 
-Consider Figure 7.2.Suppose the supply of tin increases from S? to S?.Under a buffer stock system,the buffer-stock manager could maintain the target price by:
A) Purchasing 15 pounds of tin 
B) Purchasing 30 pounds of tin 
C) Selling 15 pounds of tin 
D) Selling 30 pounds of tin

Quizplus · Accepted Answer

To maintain the target price when supply increases, the buffer-stock manager should purchase the excess supply, which is 30 pounds of tin, to prevent the price from falling.

Figure 72 Defending the Target Price in Face of Changing Supply