When the nations that constitute the Organization of the 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.

Question

Quizplus · Accepted Answer

When OPEC restricts the supply of oil to increase profits, the market fails to achieve an efficient allocation of resources. This is because the restricted supply of oil distorts the market price, leading to misallocation of resources and inefficient outcomes. Additionally, the restriction of supply may not be equitable as it can lead to higher prices for consumers who may not have access to alternative fuel sources.

When the Nations That Constitute the Organization of the Petroleum