Discussion Post
Suppose global demand for (OPEC) oil is given by P = 120 - 2Q and that each country has costs given as AC = MC = $20. The cartel maximizes profit at Q = 25 million and P = $70/barrel.
• If instead of keeping to this output, all members overproduced their quotas by 20 percent, what would be the effect on OPEC's total profit?
• Suppose instead one member increased production from 2 million to 3 million barrels. Break down the impact of this in terms of revenue and costs for both the cheating country and the cartel.
The response should include a reference list. Using one-inch margins, Times New Roman 12 pnt font, double-space and APA style of writing and citations.