Answer the following questions. Provide specific examples to support your answer

Question

Answer the following questions. Provide specific examples to support your answers. •How many countries are in this cartel? Do you think the attributes of OPEC qualify it as an oligopolistic market structure? Why or why not? •Using background such as a Nash equilibrium and the Prisoner’s Dilemma, how would you explain OPEC countries that frequently “cheat” on OPEC agreements to reduce oil production in order to keep oil prices high, and then the cheater increases production (at a lower price) in order to gain more of the profits? •Do you believe that oil prices today are being driven more by forces of market supply and demand, or by OPEC agreements? •What measure do you think OPEC could take to ensure member adherence to OPEC member-country agreements? •Is it legal in the USA to form a cartel like this? Why or why not? •If member countries have the capacity to stray from agreements, do you believe this is an oligopoly, as contrasted to all member countries adhering to the agreements? Why or why not? If all members always adhere to the OPEC agreements, is this a monopoly or is it still considered an oligopoly? Why? Do you think expanding oil production in the USA, to include possible increases in the supply from the pipeline coming from Canada, bears on the answer as to whether OPEC is a monopoly or an oligopoly?

Explanation / Answer

1. There are 13 countries in this Cartel.

2. Oligopoly is an economic market conditioon where numerous sellers have their presence in a single market. A small number of firms dominate this market & compite with each other based on product differentiation, price and customer service. Here prices are fair due to competition in the market.

But in case of OPEC we can see prices are unusuall high, there is no product differentiation. So we can say OPEC does not qualifies as a oligopolistic market stucture.

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