Why might an oil cartel's effectiveness be undermined during a ...

[audragclark]

Why might an oil cartel's effectiveness be undermined during a recession but strengthened during an economic boom?
 
  What will be an ideal response?

Question 2

Refer to Table 4-4. The table above lists the highest prices three consumers, Curly, Moe, and Larry, are willing to pay for a bottle of champagne. If the price of one of the bottles is 24 dollars
 
  A) Curly will receive 26 of consumer surplus from buying one bottle.
  B) Larry will receive 15 of consumer surplus since he will buy no bottles.
  C) Curly will buy two bottles, Moe will buy one bottle and Larry will buy no bottles.
  D) Curly and Moe receive a total of 80 of consumer surplus from buying one bottle each. Larry will buy no bottles.

[dyrone]

Answer to Question 1

During a recession the overall level of economic activity is contracting which also has the effect of lowering or slowing the demand for oil. Under these circumstances there would be great incentive for members of the cartel to lower prices. By contrast an economic boom is likely to keep the cartel stronger than ever since demand for its products are rising and member firms will find it easier to continue to abide by their cartel agreements.

Answer to Question 2

A

[audragclark]

Thanks for the timely response, appreciate it

[epscape]

Gracias!