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changes in supply, price

The opening statement on the website of the Organization of Petroleum Exporting Countries (OPEC) states, â??â?¦ OPEC´s eleven members are all developing countries whose economies are heavily reliant on oil export revenues. They therefore seek stable oil prices that are fair and reasonable for both producers and consumers of oil.â? To achieve this goal, OPEC attempts to coordinate and unify petroleum policies by raising or lowering their collective oil production. However, increased production by Russia, Oman, Mexico, Norway, and other non-OPEC countries has caused the price of crude oil to fall dramatically in recent years. To achieve its goal of stable and fair oil prices, what must OPEC do to maintain the price of oil at its desired level? Do you think this will be easy for OPEC to do? Explain.

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First, you should understand that even the OPEC countries consistently broke the cartel (i.e. the eleven countries never really formed a stable oligopoly). The reason this because as oligopolists, there is a tendency for one individual (the cheater) to break the cartel and produce more (because this brings the cheater more ...