Table: Market for Oil World Price (per barrel) World Quantity (MBD) $36.00 100 37.50 98 47.50 82 50.00 80 Suppose that oil is produced by 10 countries, each of which produces 10 million barrels of oil a day (MBD) for a total of 100 MBD. The world price of oil at this quantity is $36 per barrel, so each country earns $360 million a day. Suppose that these countries form a cartel and each country produces 8 MBD. If nine of the cartel members cheat and produce 10 MBD while one country keeps its promise and maintains production at 8 MBD, each cheater will earn revenue of: $375 million a day, while the noncheating country will earn $360 million a day. $400 million a day, while the noncheating country will earn $360 million a day. $400 million a day, while the noncheating country will earn $300 million a day. $375 million a day, while the noncheating country will earn $300 million a day.

Table: Market for Oil World Price (per barrel) World Quantity (MBD) $36.00 100 37.50 98 47.50 82 50.00 80 Suppose that oil is produced by 10 countries, each of which produces 10 million barrels of oil a day (MBD) for a total of 100 MBD. The world price of oil at this quantity is $36 per barrel, so each country earns $360 million a day. Suppose that these countries form a cartel and each country produces 8 MBD. If nine of the cartel members cheat and produce 10 MBD while one country keeps its promise and maintains production at 8 MBD, each cheater will earn revenue of: $375 million a day, while the noncheating country will earn $360 million a day. $400 million a day, while the noncheating country will earn $360 million a day. $400 million a day, while the noncheating country will earn $300 million a day. $375 million a day, while the noncheating country will earn $300 million a day.

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 8PA

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