OPEC is able to raise the price of its product by

a. setting production levels for each of its members.

b. tying.

c. imposing resale price maintenance agreements on members.

d. increasing the supply of oil above the competitive level.

answer

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Sonal BahlLv10

3 Feb 2021

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Answer the following questions. Provide specific examples to support your answers.

1. How many countries are in this cartel? Do you think the attributes of OPEC qualify it as an oligopolistic market structure? Why or why not?

2. Using backgrounds such as a Nash equilibrium and the Prisoner Dilemma, how would you explain OPEC countries that frequently cheat on OPEC agreements to reduce oil production to keep oil prices high, and then the cheater increases production (at a lower price) to gain more of the profits?

3. Do you believe that oil prices today are being driven more by forces of market supply and demand, or by OPEC agreements?

4. What measure do you think OPEC could take to ensure member adherence to OPEC member-country agreements? Is it legal in the USA to form a cartel like this? Why or why not?

5. If member countries have the capacity to stray from agreements, do you believe this is an oligopoly, as contrasted to all member countries adhering to the agreements? Why or why not?

6. If all members always adhere to the OPEC agreements, is this a monopoly, or is it still considered an oligopoly? Why?

7. Do you think expanding oil production in the USA, to include possible increases in the supply from the pipeline coming from Canada, bears on the answer as to whether OPEC is a monopoly or an oligopoly?

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The opening statement on the Web site of the Organization of Petroleum Exporting Countries says, "OPEC's eleven members are all developing countries whose economies are heavily reliant on oil export revenues. THey therefore seek stable oil prices that are fair and reasonable for both producers and consumers of oil." To achieve this goal, OPEC attempts to coordinate and unify petroleum policies by raising or lowering their collective oil production. However, increased production by Russia, Oman, Mexico, Norway, and other non-OPEC countries has caused the price of crude oil to fall dramatically in recent years. To achieve its goal of stable and fair oil prices, what must OPEC do to maintain the price of oil at its desired level? Do you think this will be easy for OPEC to do? Explain.

magentacheetah266

The New York Times (Nov. 30, 1993) reported that "the inability of OPEC to agree last week to cut production has sent the oil market into turmoil...[leading to] the lowest price for domestic crude oil since June 1990."

A. Why were the members of OPEC trying to agree to cut production?

B. Why do you suppose OPEC was unable to agree on cutting production? Why did the oil market go into "turmoil" as a result?

C. The newspaper also noted OPEC's view "that producing nations outside the organization, like Norway and Britain, should do their share and cut production." What does the phrase "do their share" suggest about OPEC's desired relationship with Norway and Britain?