Suppose the demand for oil is P=122Q-0.20. There are two oil producers who do not cooperate. Producing oil costs $13 per barrel. What is the profit of each cartel member
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- Suppose the demand for oil is P=145Q-0.20. There are two oil producers who form a cartel. Producing oil costs $14 per barrel. What is the profit of each cartel member?Suppose the demand for oil is P=146Q-0.20. There are two oil producers who do not cooperate. Producing oil costs $7 per barrel. What is the profit of each cartel member? There is only one answer, not two.QUESTION 3 Suppose the demand for oil is P-125Q-0.20. There are two oil producers who do not cooperate. Producing oil costs $11 per barrel. What is the profit of each cartel member? 55
- OPEC is a petroleum cartel, a group of oil producing countries whose objective is to coordinate and unify petroleum policies. What type of market structure is a cartel?Why are cartel agreements often not successful? Different firms experience different costs. All parties would make more money if everyone increased production. One party has an incentive to cheat to make more profit?What is a cartel? Explain the coordination problem it faces.
- Suppose that two identical firms produce widgets and that they are the only firms in the market. The average and marginal cost is €6 for each firm. Price is determined by the following demand curve: P = 30 – Q where Q = Q1 + Q2. Suppose the two firms combine together and form a cartel. The output produced by each firm in the cartel is (assuming that they split the cartel output equally between them) A. 6 B. 12 C. 8 D. 4 Two identical firms compete in a market to sell a homogenous good with the following inverse demand function: P = 600 – 3Q. Each firm produces at a constant marginal cost of €300 and there are no fixed costs. The price that each firm in the Cournot equilibrium will charge is A. 400 B. 500 C. 300 D. 450Why has the OPEC oil cartel succeeded in raising prices substantially while the CIPEC copper cartel has not? What conditions are necessary for successful cartelization?What is the primary reason that cartels fail to work? Becoming a cartel reduces barriers to entry for new firms. It is trivial for one firm to force the other cartel members out of the market and become a monopoly. Firms in a cartel can increase their profits by breaking the agreements made with the other cartel firms. Anti-trust law is quick to break up cartels. Operating as part of a cartel is more expensive and reduces profits.
- Isolated Island has two natural gas wells, one owned by Tom and the other owned by Jerry. Each well has a valve that controls the rate of flow of gas. The marginal cost of producing gas is $12 a unit. The table gives the demand schedule for gas on this island If Tom and Jerry form a cartel and maximize their joint profit, what will be the price of gas and the total quantity produced? If Tom and Jerry form a cartel and maximize their joint profit, the price of a unit of gas is $ and the quantity produced is units a day Q Search Price (dollars per unit) 36 33 30 27 24 21 18 15 Quantity demanded (units per day) 0 1 2 3 4 5 6 7 NextIn the United States cartels areCartels have a difficult time maintaining their output agreements because an individual firm has an incentive to deviate (increase their output) from the arrangement. T/F
