1. A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $2,000 per diamond, and the demand for diamonds is described by the following schedule:
Price Quantity (Dollars) Quantity(Diamonds)
Price Quantity (Dollars)
Quantity (Diamonds)
8000
2000
7000
3000
6000
4000
5000
5000
4000
6000
3000
7000
2000
8000
1000
9000
a)If there were many suppliers of diamonds, the price would be _____ per diamond and the quantity sold would be _____ diamonds.
b)If there were only one supplier of diamonds, the price would be _____ per diamond and the quantity sold would be _____ diamonds.
c)Suppose Russia and South Africa form a cartel. In this case, the price would be _____ per diamond and the total quantity sold would be _____ diamonds. If the countries split the market evenly, South Africa would produce _____ diamonds and earn a profit of _____.
d) If South Africa increased its production by 1,000 diamonds while Russia stuck to the cartel agreement, South Africa's profit would ____ to ______. Why are cartel agreements often not successful?
A. One party has an incentive to cheat to make more profit.
B. Different firms experience different costs.
C. All parties would make more money if everyone increased production.
1. A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $2,000 per diamond, and the demand for diamonds is described by the following schedule:
Price Quantity (Dollars) Quantity(Diamonds)
| Price Quantity (Dollars) | Quantity (Diamonds) |
| 8000 | 2000 |
| 7000 | 3000 |
| 6000 | 4000 |
| 5000 | 5000 |
| 4000 | 6000 |
| 3000 | 7000 |
| 2000 | 8000 |
| 1000 | 9000 |
a)If there were many suppliers of diamonds, the price would be _____ per diamond and the quantity sold would be _____ diamonds.
b)If there were only one supplier of diamonds, the price would be _____ per diamond and the quantity sold would be _____ diamonds.
c)Suppose Russia and South Africa form a cartel. In this case, the price would be _____ per diamond and the total quantity sold would be _____ diamonds. If the countries split the market evenly, South Africa would produce _____ diamonds and earn a profit of _____.
d) If South Africa increased its production by 1,000 diamonds while Russia stuck to the cartel agreement, South Africa's profit would ____ to ______. Why are cartel agreements often not successful?
A. One party has an incentive to cheat to make more profit.
B. Different firms experience different costs.
C. All parties would make more money if everyone increased production.
Related textbook solutions
Related questions
The demand and supply schedules for sunscreen at a small beach are shown below.
| Price(Dollars) | Quantity demanded of sunscreen bottles | Quantity supplied of sunscreen bottles |
| $35 | 1000 | 8500 |
| 30 | 2000 | 7000 |
| 25 | 3000 | 5500 |
| 20 | 4000 | 4000 |
| 15 | 5000 | 2500 |
| 10 | 6000 | 1000 |
a. If the price was $15 per bottle, the quantity demanded would be...... bottles, the quantity supplied would be .......bottles, and there would be ..........pressure on price. b. In the market for sunscreen, the equilibrium price is........ $ and the equilibrium quantity is........ bottles.
