Author Question: Using the figure above, which of the following statements are correct? i. When 3 haircuts are ... (Read 57 times)

daltonest1984 · **on:** Jun 29, 2018

Using the figure above, which of the following statements are correct?

i. When 3 haircuts are produced, the firm's ATC is 10.
ii. If the firm charges each customer the same price for a haircut, the price of a haircut is 14.
iii. The firm is NOT a perfect competitor.
A) i only
B) ii only
C) i and ii
D) i and iii
E) i, ii, and iii

Question 2

OPEC, the Organization of Petroleum Exporting Countries, was formed in Baghdad in 1960. Since its formation, this cartel has suffered from a major problem with respect to the quota (limit) of output it assigns each member nation.

What is OPEC's goal and what sort of quota do you think the cartel assigns? How and why do nations cheat on their quota? What happens when a nation cheats on its quota?

Cheesycrackers · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

E

Answer to Question 2

In order to keep oil prices high, as has been the case since 2003, OPEC creates a target level of output designed to achieve a particular high price. OPEC's goal is to set a price high enough so that its member nations earn the maximum economic profit. Once the target output is set, OPEC assigns a production quota to each member. As long as each member adheres to its quota the price will remain high and stable. However, from time to time, individual nations cheat on the agreement by producing more oil than they are allowed. Nations cheat because they realize that if they alone cheat, the impact on oil prices will be slight but the impact on their profit will be large. Once this oil shows up on world markets, the supply of oil increases and prices begin to fall. Then, once prices begin to fall other members begin to panic and they start selling more oil too in order to get the highest price they can before a collapse takes place. If every nation cheats, the supply will increase more than if just a few do and the collapse in price becomes a self-realizing prophecy.