At various times, the nations that constitute the Organization of Petroleum Exporting Countries (OPEC) have restricted the supply of oil to increase their profits. This is an example of:
A)individual actions whose side effects are not properly taken into account by the market.
B)one party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself.
C)the unsuitability of some goods for efficient management by markets.
D)regulating self-interest.

Question

Quizplus · Accepted Answer

OPEC restricting the supply of oil is an example of one party (i.e., OPEC) preventing mutually beneficial trades (i.e., oil consumers and other oil-producing countries) in an attempt to capture a greater share of resources for itself (i.e., higher profits). This is a classic example of a market failure known as a negative externality, where individuals or groups of individuals pursuing their self-interest can harm others and the overall society.

At Various Times, the Nations That Constitute the Organization of Petroleum