Explain why OPEC is caught in a prisoner's dilemma?
What will be an ideal response?
If every member of OPEC cooperates and produces the low output level dictated by its quota, prices will be high, and the cartel will earn large profits. Once the price has been driven up, however, each member has an incentive to stop cooperating and to earn even higher profits by increasing output beyond its quota. Thus, it is rational for an individual member to unilaterally increase output to maximize its earnings. But if no country sticks to its quota, total oil output will increase, and collective profits will decline.
You might also like to view...
Suppose the Federal Reserve buys bonds from the banking system, the money supply curve ________.
A. will become flatter B. will become steeper C. shift to the left D. shift to the right
The Fed established stock market margin requirements to reduce the possibility of a stock market panic
Indicate whether the statement is true or false
Over time, housing shortages caused by rent control
a. increase, because the demand for and supply of housing are less elastic in the long run. b. increase, because the demand for and supply of housing are more elastic in the long run. c. decrease, because the demand for and supply of housing are less elastic in the long run. d. decrease, because the demand for and supply of housing are more elastic in the long run.
Consider two points on the PPF: point A, at which there are 50 oranges and 100 apricots, and point B, at which there are 51 oranges and 98 apricots. If the economy is currently at point B, the opportunity cost of moving to point A is
A) 2 apricots. B) 1 orange. C) 98 apricots. D) 3 oranges.