OPEC, the Organization of Petroleum Exporting Countries, Was Formed in Baghdad

question 44

Essay

OPEC, the Organization of Petroleum Exporting Countries, was formed in Baghdad in 1960. Since its formation, this cartel has suffered from a major problem with respect to the quota (limit) of output it assigns each member nation. What is OPEC's goal and what sort of quota do you think the cartel assigns? How and why do nations cheat on their quota? What happens when a nation cheats on its quota?

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Definitions:

Consumer Surplus

The gap in the total amount consumers are willing to invest in a product or service and the amount they end up paying.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, measuring their benefit.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total benefit to society from the production and consumption of a good or service.

Tax

A financial charge or levy imposed by a government on individuals, corporations, or transactions to fund public expenditures.