6. Assume there are ten countries of equal size in OPEC that face a demand for oil of P = 100 – 0.5Q. Marginal cost (MC) is constant and equal to $20. What will be the cartel price and quantity? How much will each country receive as a quota? What will be the deadweight loss as compared to a competitive oil industry?

Referring back to question 6, what factor makes it difficult for the cartel to stick to its agreement in the short run? What about the long run?

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Cartel Pricing in a Competitive Market Assuming there are ten equalsized OPEC countries facing a demand curve of P 100 05Q and a constant marginal cos... View the full answer