Costs of individual countries before and after demand shock

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Reference no: EM131391931

Suppose that you are trying to determine whether OPEC is an effective cartel. Suppose there is an exogenous (outside of system) and unanticipated shock to world oil supplies, for example political unrest that causes oil exports from Venezuela to fall to zero or tensions in the Middle East that interferes with production. Discuss how you would go about distinguishing between the following models if you could observe market prices, output levels for individual countries, and the short run marginal oil production costs of individual countries before and after the demand shock.

a. Perfect cartel

b. Dominant firm/fringe firm

c. Cournot competition

d. Perfect competition

Reference no: EM131391931

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