Problem:
You have been contracted by an economic consulting firm to determine the economic structure and possible future actions of OPEC, the Organization of Petroleum Exporting Countries.
Using the Library, the Internet, and your course materials, find websites that offer this information and answer the following questions (Perloff, 2007).
1. Explain the difference between a monopoly and an oligopoly, and a cartel.
2. Provide an example of a monopoly, an oligopoly, and a cartel.
3. Discuss the welfare effects of monopolies and oligopolies.
4. How does game theory explain the interactions of firms within oligopolies and cartels?
5. Using your own words, discuss the economic purpose of OPEC. What has happened to oil prices over the past five years?
6. Based on your answers to the above questions, synthesize the information you have gathered and tell the economic consulting firm which actions you think OPEC will take over the next year.
Summarize your research findings.
Reference
Perloff, J. M. (2007). Microeconomics (4th ed.). New York: Pearson Addison Wesley.
Instructor Comments: Most people do well defining and explaining each of the market types, their differences and giving examples. Where many papers need more work is in describing welfare effects, and applying game theory to the behavior of firms in Cartels. Welfare effects are measure using consumer surplus and producer surplus.