Question
In: Accounting
The Organization of the Petroleum Exporting Countries (OPEC) is a group of oil producers that have...
The Organization of the Petroleum Exporting Countries (OPEC) is a group of oil producers that have entered into an agreement aimed at controlling the world supply of oil. They behave like a monopolist, seeking to maximize profits by restricting output and increasing price. Suppose that the inverse demand curve for oil over the next five years is P = 165 − 2.5Q, where Q is millions of barrels per day. OPEC’s marginal cost is $15/barrel, or C(Q) = 15Q.
a. What is OPEC’s profit-maximizing level of output? What is the price of oil?
b. Business consultants believe that maximizing short-run profit is counterproductive for OPEC in the long run. They suggest that high oil prices push consumers to conserve energy and find cheaper alternatives. High oil prices also lead to innovation and new competition that increases the overall supply of oil in the future. It is estimated that demand will stay the same if oil prices stabilize at around $65/barrel or below, and if oil price exceeds $65/barrel then demand in the long run (over a second five-year period) will decrease to P = 135 − 2.5Q. Suggest what OPEC should do if their goal is to maximize total profit over the next 10 years.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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OPEC (organization of petroleum exporting countries) is a group
of countries that generates 45% of the world’s total crude oil
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oil produced each year. Countries in the OPEC sometimes do not
agree with the prevailing price of oil in the global market. In
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The opening statement on the website of the Organization of Petroleum Exporting Countries (OPEC) says its...
The opening statement on the website of the Organization of
Petroleum Exporting Countries (OPEC) says its members seek “. . .
to secure an efficient, economic and regular supply of petroleum to
consumers, a steady income to producers and a fair return on
capital for those investing in the petroleum industry.” To achieve
this goal, OPEC attempts to coordinate and unify petroleum policies
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However, increased production by Russia, Oman, Mexico, Norway,...
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Perhaps the most famous example of oligopolistic collusion is
the Organization of Petroleum Exporting Countries
(OPEC). During the 1970s, this cartel, which controlled
much of the world supply of oil at the time, was able to control
output and significantly raise world oil prices. However, since
that time, OPEC has been largely unsuccessful in controlling the
supply of oil.
Another factor that has weakened OPEC control is oil discoveries
in other countries, induced in part by expected profits due to...
When OPEC (Organization for Petroleum Exporting Countries) was established and started to apply a quota (restriction)...
When OPEC (Organization for Petroleum Exporting Countries) was
established and started to apply a quota (restriction) in petroleum
production, this triggered a crisis that we called as stagflation
(supply shock) in 1970s. Can you write what did happen and why did
it happen clearly by drawing a graph to explain this crisis. Don’t
forget to label the graph and also explain how an economy get rid
of from this crisis?
Assignment-2 A. Analyse the functions of Organization of Petroleum Exporting Countries and identify OPEC member nations...
Assignment-2
A. Analyse the functions of Organization of Petroleum Exporting
Countries and identify OPEC member nations influence and maintain
the price of oil through the control of production levels and to
generate revenue in recent years. [1000 – 1200 words] 4 Marks.
B. Compare and analyse the effect of Multi-National Companies
(MNCs) in Fast Food Chain Outlets with Saudi Based domestic Fast
Food Outlets.
Consider one MNC Fast Food outlet (McDonalds / KFC / Pizza Hut /
Baskin-Robbins) with one...
Assignment-2 A. Analyse the functions of Organization of Petroleum Exporting Countries and identify OPEC member nations...
Assignment-2
A. Analyse the functions of Organization of Petroleum Exporting
Countries and identify OPEC member nations influence and maintain
the price of oil through the control of production levels and to
generate revenue in recent years. [1000 – 1200 words] 4 Marks.
B. Compare and analyse the effect of Multi-National Companies
(MNCs) in Fast Food Chain Outlets with Saudi Based domestic Fast
Food Outlets.
Consider one MNC Fast Food outlet (McDonalds / KFC / Pizza Hut /
Baskin-Robbins) with one...
Assignment-2 A. Analyse the functions of Organization of Petroleum Exporting Countries and identify OPEC member nations...
Assignment-2
A. Analyse the functions of Organization of Petroleum Exporting
Countries and identify OPEC member nations influence and maintain
the price of oil through the control of production levels and to
generate revenue in recent years. [1000 – 1200 words] 4 Marks.
B. Compare and analyse the effect of Multi-National Companies
(MNCs) in Fast Food Chain Outlets with Saudi Based domestic Fast
Food Outlets.
Consider one MNC Fast Food outlet (McDonalds / KFC / Pizza Hut /
Baskin-Robbins) with one...
Suppose an oil-importing economy is in long-run equilibrium. Organization of petroleum exporting countries decides to reduce...
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Organization of petroleum exporting countries decides to reduce oil
production causing oil price to soar.
b. To stabilize price in short-run, should Central bank decrease
discount rate?
c. If policymakers do nothing, please show the new long run
equilibrium. What causes the economy to move from short run to long
run equilibrium?
Please answer both if possible, thank you so much.
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ORGANISATION OF PETROLEUM EXPORTING COUNTRIES- OPEC ( MAJOR
SUPPLIERS) VERSUS ORGANISATION FOR ECONOMIC COOPERATION AND
DEVELOPMENT- OECD ( MAJOR BUYERS) In the short run, both the supply
and demand for crude petroleum oil are relatively inelastic. Supply
is inelastic because the quantity of known crude petroleum oil
reserves and the capacity for oil extraction cannot be changed
quickly, as price fluctuates, couple with the indiscipline of some
OPEC member countries in dire need for money for development, often
exceed their...
Gas O.P.E.C. (Organization of Petroleum Exporting Countries) been successful in controlling the behavior of its members....
Gas O.P.E.C. (Organization of Petroleum Exporting Countries) been
successful in controlling the behavior of its members. Support your
answer with 250 words or more.
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