The Organization of Petroleum Exporting Countries (OPEC)behaves in Many Ways

question 17

Multiple Choice

The Organization of Petroleum Exporting Countries (OPEC) behaves in many ways like an international cartel.If the cartel were to hire a consulting firm to monitor the production rates of member countries,the economic reason for this monitoring would be to

• A) make sure that each member country is producing at an output level at which price equals marginal cost.
• B) make sure all the member countries produce at least their quotas,so that there will be no oil shortage.
• C) detect those member countries that are reducing prices by producing more than their assigned quotas.
• D) make sure that the marginal revenue for the last barrel of oil sold by each member country is less than its price.
• E) make sure competition is increased.

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Definitions:

Ask Price

The lowest price a seller is willing to accept for an asset in the market.

Corporate Bond

A debt security issued by a corporation to raise funding, which offers interest payments to holders until maturity.

Futures Contract

A standardized legal agreement to buy or sell a specific commodity or financial asset at a predetermined price at a specified time in the future.

US Treasury Repo

A form of short-term borrowing for dealers in government securities, using U.S. Treasury securities as collateral.