OPEC, the organization of petroleum exporting countries, o…
OPEC, the organization of petroleum exporting countries, opted to keep its petroleum (crude oil) output unchanged, expressing confidence in the market despite global supply strains that kept prices high. OPEC kept its production at 30 million barrels per day. A. Using the information above and the price and output decisions of a profit maximizing firm, explain how oligopolies can act like a monopoly. B. Suppose one of the OPEC members, say Saudi Arabia, “cheated” on its agreement and decided to increase its production. Explain using your understanding of revenue, costs and profits for a oligopoly firm, what impact this increase in production would have on the petroleum market? C. Based on the event in B, does demand or supply shift in the petroleum market? In your answer you will want to clearly explain your shifts, direction and what happens to price and quantity as a result.