The New York Times (Nov. 30, 1993) reported that “the inability of OPEC to agree last...

The New York Times (Nov. 30, 1993) reported that “the inability of OPEC to agree last week to cut production has sent the oil market into turmoil . . . [leading to] the lowest price for domestic crude oil since June 1990.”

Statements	True	False
The members of OPEC were trying to agree to cut production so they could raise the price.
OPEC was unable to agree on cutting production because each country experiences different production costs.

The newspaper also noted OPEC's view “that producing nations outside the organization, like Norway and Britain, should do their share and cut production.”

What does the phrase “do their share” suggest about OPEC's desired relationship with Norway and Britain?

OPEC would like Norway and Britain to act competitively.

OPEC would like Norway and Britain to keep their production levels high.

OPEC would like Norway and Britain to join the cartel.

Solutions

Expert Solution

Statement 1: True
Statement 2: False
Explanation: The OPEC wants its member countries to cut production to artificially create a shortage so that the price goes up and OPEC members enjoy higher revenue. So, statement 1 is true.
OPEC fails to ensure that countries cut production as the higher price of oil increases the incentive of each country to increase production and earn a higher revenue So, the oil cartel does not become sustainable.
The answer to the last question: option 3: OPEC would like Norway and Britain to join the cartel.
Explanation: OPEC would like to keep the production of oil to be kept low in the entire world. Therefore, it would like Norway and Britain to cooperate and keep the production low. This would help OPEC attain its original objective of keeping oil price high by lower production.

Rahul Sunny answered 1 year ago

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