Use the following to answer questions: Table: Three-Country Oil Production $$\begin{array} { | c | c | }
\hline \text { Total Market Output } & \text { Market Price } \
\hline 600 & 90 \
\hline 800 & 80 \
\hline 1,000 & 70 \
\hline 1,200 & 60 \
\hline 1,400 & 50 \
\hline 1,600 & 40 \
\hline 1,800 & 30 \
\hline
\end{array}$$
-(Table: Three-Country Oil Production) Refer to the table. Suppose that three countries are engaged in oil production. For simplicity, assume zero costs so that revenue equals profit. Suppose that Country A cheats on the cartel agreement by producing 200 more barrels than the other two countries. What would Country B's reaction be?
A) lower its own quantity to 200 units
B) increase its own quantity to 1,600 units
C) increase the market price to $60
D) increase its own quantity to 600 units

Question

Use the following to answer questions: Table: Three-Country Oil Production $$\begin{array} { | c | c | } 
\hline \text { Total Market Output } & \text { Market Price } \
\hline 600 & 90 \
\hline 800 & 80 \
\hline 1,000 & 70 \
\hline 1,200 & 60 \
\hline 1,400 & 50 \
\hline 1,600 & 40 \
\hline 1,800 & 30 \
\hline
\end{array}$$
-(Table: Three-Country Oil Production) Refer to the table. Suppose that three countries are engaged in oil production. For simplicity, assume zero costs so that revenue equals profit. Suppose that Country A cheats on the cartel agreement by producing 200 more barrels than the other two countries. What would Country B's reaction be?
A) lower its own quantity to 200 units
B) increase its own quantity to 1,600 units
C) increase the market price to $60
D) increase its own quantity to 600 units

Quizplus · Accepted Answer

Country B would likely increase its own quantity to 600 units to maintain its revenue and profit, as Country A's cheating would lower the market price.

Use the Following to Answer Questions: Table: Three-Country Oil Production