Pearson eText Microeconomics -- Instant Access (Pearson+)
9th Edition
ISBN: 9780136879572
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON+
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Question
Chapter 12, Problem 12E
(a)
To determine
The illustration of the demand curve W on the non-OPEC and OPEC supply curve.
(b)
To determine
The optimal price of OPEC.
(c)
To determine
The impact of buyers cartel.
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Why has the OPEC oil cartel succeeded in raising prices substantially while the CIPEC copper cartel has not? What conditions are necessary for successful cartelization?
The table shows a hypothetical demand schedule for monosodium glutamate (MSG). Ajinomoto holds 5050% of the market, Jiali holds 3030% of the market, and Quingdao holds 2020% of the market.
Suppose the three firms agree to form a cartel to fix production of monosodium glutamate. Assume marginal cost equals zero, and the output is split equally across the firms. What quantity maximizes the cartel's profit?
Price of MSG ($ per pound)
Quantity of MSG demanded (millions of pounds)
$8$8
00
$7$7
2020
$6$6
3030
$5$5
4040
$4$4
6060
$3$3
9090
$2$2
110110
$1$1
180180
$0$0
300300
million pounds million pounds
Suppose Ajinomoto's marginal cost remains equal to zero, but for Jiali and Quingdao, marginal costs rise above zero. How would this affect the incentive of Ajinomoto to act noncooperatively and change its output?
Ajinomoto will not have an incentive to change its output.
Ajinomoto will have an incentive to increase its output of MSG.…
The diagram below illustrates the change in market equilibrium in the global oil market due to a demand shock, with the demand
curve shifting from Demand to Demand'. Supply of oil is provided by OPEC countries, as part of a cartel agreement, and other
countries outside the cartel,
P.
P.
Demand
Demand
Quantity, Q
Q Q.
Which of the following statements is/are correct?
global
a) If more countries joined OPEC, and reduced the quantity of oil that they produced as a cartel, it is possible that
market oil price could stay the same depending on other market dynamics.
b) The price of oil in the global market is fixed by the members of the OPEC cartel.
c) If there is increased production of oil in a non-OPEC country when demand is at Demand' there would be a reduction in price
from P1, ceteris paribus.
Chapter 12 Solutions
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