Asked by Michelle McDade on Jun 22, 2024
Verified
When the nations that constitute the Organization of Petroleum Exporting Countries (OPEC) restrict the supply of oil to increase their profits,the oil market:
A) achieves an efficient outcome because profits increase.
B) achieves an equitable outcome because the nations with oil resources receive the profits commensurate with that resource.
C) fails because there is no longer an efficient allocation of resources.
D) fails because there is no longer an equitable allocation of resources.
OPEC
The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization of oil-producing countries that coordinates and unifies the petroleum policies of its member states.
Efficient Allocation
The distribution of resources in a way that maximizes the net benefit to society or achieves a desired outcome effectively.
Equitable Allocation
The fair and just distribution of resources among different groups or individuals.
- Acquire an understanding of circumstances that result in market inefficiencies and the necessity of policy measures to rectify these shortcomings.
Verified Answer
LW
Lashandra williamsJun 27, 2024
Final Answer :
C
Explanation :
When OPEC restricts the supply of oil, the market fails because the allocation of resources is no longer efficient. This is because the restricted supply leads to a shortage of oil, which can cause prices to increase and result in consumers being unable to purchase the oil they need. This can lead to inefficiencies such as hoarding, rationing, and predatory pricing. Additionally, the profits that OPEC countries receive from restricting supply come at the expense of other countries that rely on oil imports, which can lead to an inequitable allocation of resources.
Learning Objectives
- Acquire an understanding of circumstances that result in market inefficiencies and the necessity of policy measures to rectify these shortcomings.