Describe the source of tension between cooperation and self-interest in a market characterized by oligopoly. Use an example of an actual cartel arrangement to demonstrate why this tension creates instability in cartels


The source of the tension exists because total profits are maximized when oligopolists cooperate on price and quantity by operating as a monopolist. However, individual profits can be gained by individuals cheating on their cooperative agreement. This is why cooperative agreements among members of a cartel are inherently unstable. This is evident in the problem OPEC experiences in enforcing the cooperative agreement on production and price of crude oil.

Economics

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A) 0.2. B) 2.5. C) 5. D) 20.

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If airports decide to compensate people who suffer from airplane noise because their homes are under the runway approaches, to whom should they offer monetary payments? The people who

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Economics

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A) a price that exceeds its average total cost. B) a price that exceeds its marginal cost. C) an average total cost that exceeds its price. D) a marginal cost that exceeds its price.

Economics

Banks make use of the federal funds market in part to

A) pay their tax liabilities. B) manage liquidity risk. C) deal with moral hazard. D) deal with adverse selection.

Economics