24. The following report appeared in The Daily Gazette (Schenectady, NY, Sept. 25, 1993): OPEC's high...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
24. The following report appeared in The Daily Gazette (Schenectady, NY, Sept. 25, 1993): OPEC's high oil output and falling prices have cost member countries about $6 billion since the spring and some countries continue to exceed production limits, the cartel said. One day ahead of a crucial meeting on Saturday, the Organi- zation of Petroleum Exporting Countries and its dozen members were pumping about a million barrels above the ceiling of 23.6 million barrels. To better understand this, let's consider a hypothetical version of OPEC consisting of six countries. Assume that as the number of bar- Exercises 147 rels of oil produced by OPEC per day increases, the price decreases according to the following table (which is also hypothetical): Barrels per day produced (in millions) Resulting price per barrel (in dollars) 24 25 26 27 28 29 30 24 23 22 21 20 19 18 Suppose OPEC agrees that each of the six countries will produce four million barrels per day, even though each country has the abil ity to produce five million barrels per day at no additional cost to itself. Suppose also that if anyone violates the agreement, no one will know who did (but everyone will know how many countries did because of the resulting price per barrel). Assume you are the leader of one of the six OPEC countries and you are only concerned with financial gain for your country. You have to decide whether to produce four million barrels per day or five million barrels per day. (a) The number of OPEC countries, other than yours, who produce five million barrels per day instead of four million could be 0, 1, 2, 3, 4, or 5. For each of these six cases, determine if your country is better off financially producing five million barrels per day or four million barrels per day. (b) Still assuming your only concern is immediate financial gain for your country, what does (a) indicate you should do and how compelling is this indication? (c) If all six countries care only about their own immediate financial gain, what does (b) suggest will happen? (d) Given what you said in (c), how does your country fare financially compared to how it would do if everyone (including you) stuck to the original agreement? (e) In a well-written paragraph or two, discuss how this hypothetical scenario is similar in spirit to something that arose in our study of 2 x 2 ordinal games. 24. The following report appeared in The Daily Gazette (Schenectady, NY, Sept. 25, 1993): OPEC's high oil output and falling prices have cost member countries about $6 billion since the spring and some countries continue to exceed production limits, the cartel said. One day ahead of a crucial meeting on Saturday, the Organi- zation of Petroleum Exporting Countries and its dozen members were pumping about a million barrels above the ceiling of 23.6 million barrels. To better understand this, let's consider a hypothetical version of OPEC consisting of six countries. Assume that as the number of bar- Exercises 147 rels of oil produced by OPEC per day increases, the price decreases according to the following table (which is also hypothetical): Barrels per day produced (in millions) Resulting price per barrel (in dollars) 24 25 26 27 28 29 30 24 23 22 21 20 19 18 Suppose OPEC agrees that each of the six countries will produce four million barrels per day, even though each country has the abil ity to produce five million barrels per day at no additional cost to itself. Suppose also that if anyone violates the agreement, no one will know who did (but everyone will know how many countries did because of the resulting price per barrel). Assume you are the leader of one of the six OPEC countries and you are only concerned with financial gain for your country. You have to decide whether to produce four million barrels per day or five million barrels per day. (a) The number of OPEC countries, other than yours, who produce five million barrels per day instead of four million could be 0, 1, 2, 3, 4, or 5. For each of these six cases, determine if your country is better off financially producing five million barrels per day or four million barrels per day. (b) Still assuming your only concern is immediate financial gain for your country, what does (a) indicate you should do and how compelling is this indication? (c) If all six countries care only about their own immediate financial gain, what does (b) suggest will happen? (d) Given what you said in (c), how does your country fare financially compared to how it would do if everyone (including you) stuck to the original agreement? (e) In a well-written paragraph or two, discuss how this hypothetical scenario is similar in spirit to something that arose in our study of 2 x 2 ordinal games.
Expert Answer:
Related Book For
International Economics Theory and Policy
ISBN: 978-0273754206
9th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
Posted Date:
Students also viewed these mathematics questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-4. Ivan and Irene paid the following in 2012 (all by check or can otherwise be...
-
The Qantas Group includes a sustainability report in its annual report. What key performance indicators are included in this report? Explain the different stakeholders that would be interested in...
-
Referring to the surface profile in Fig. 4.3, give some numerical values for the vertical distances from the center line. Calculate the Ra and Rq values. Then give another set of values for the same...
-
Valley Bleu Ltée reported the following current accounts at December 31, 2013 (amounts in thousands): a. Cash...
-
Identify each of the following as an example of a perceived pressure (P), perceived opportunity (O), or rationalization (R) in the fraud triangle: 1. Job dissatisfaction 2. Greed. 3. "It's for a good...
-
Mulcahey Builders (MB) remodels office buildings in low-income urban areas that are undergoing economic revitalization. MB typically accepts a 25% down payment when they complete a job and a note,...
-
You will be drafting Interrogatories and an accompanying Notice & Certificate of Service of Discovery Materials. You will be drafting them as the attorney for either Harley Quinn or Joker, utilizing...
-
What discount rate is the Powerball lottery company using when deciding to pay a lump sum of $327.8m to each of the 3 winning ticket holders?
-
Contract employees: mare employees do not charge for their services O are not deemed to be employees of the company O charge from 25 to 50 percent of payroll
-
Where a defendant has had an opportunity for a full and fair review of his or her trial through an appeal, what justifies the availability of additional avenues of review through collateral attack?
-
If a city already has sports infrastructure in place, should it frequently bid for mega-events? Should relatively poor countries refrain from hosting?
-
How would professional baseball change for both teams and fans if it practiced promotion and relegation?
-
How does the economic impact of holding the Super Bowl in Minneapolis, Minnesotathe site of Super Bowl LIIcompare with holding it in Miami or New Orleans at the same time?
-
Have courts aided society by allowing escapees from prison to defend their actions on the basis of intolerable prison conditions? Are such conditions likely to be remedied by the legislative process?
-
7) Br heat + CH;CO,H (solvent acetic acid)
-
Place a tick in the appropriate grid to identify the balance that would be brought down in each of the following named accounts, in the books of Rizwy Mohamed: (a) In the Cash account: if Rizwy...
-
How might a zero interest rate complicate the task of monetary policy?
-
Early studies of the economic convergence hypothesis, which looked at data for a group of currently industrialized countries, found that those that were relatively poor a century ago subsequently...
-
How would you draw the DD-AA diagram when the current accounts response to exchange rate changes follows a J-curve? Use this modified diagram to examine the effects of temporary and permanent changes...
-
The performance data of Problem 10.57 are for a 36-in.diameter fan wheel. The fan also is manufactured with 42-, 48-, 54-, and 60-in.-diameter wheels. Pick a standard fan to deliver \(600...
-
Preliminary calculations for a hydroelectric power generation site show a net head of \(2350 \mathrm{ft}\) is available at a water flow rate of \(75 \mathrm{ft}^{3} / \mathrm{s}\). Compare the...
-
Experimental test data for an aircraft engine fuel pump are presented below. This gear pump is required to supply jet fuel at 450 pounds per hour and \(150 \mathrm{psig}\) to the engine fuel...
Study smarter with the SolutionInn App