Lecture 25 - Lecture 25: Energy Prices OPEC and the oil...

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Lecture 25: Energy Prices OPEC and the oil market electricity OPEC and the Oil Market OPEC controls about three-quarters of world oil reserves. OPEC is a cartel: an organization of individual competitors that join to form a single monopolist. Under competition, the price of oil is P comp and an individual OPEC member produces q comp and earns just a normal profit. With a cartel, joint profits are maximized at P opec and Q opec . Since Q opec < Q comp , q opec must be less than q comp for each OPEC member each member is assigned a quota, q opec . At q opec , MR > MC profits rise if the country expands production. Produce at q cheat , where MR = MC. But, if all members cheat, total production rises the price of oil falls competitive outcome Electricity In California utilities owned both the electricity generators and the transmission lines. Deregulation in 2000 required the utilities to sell their generating capacity. The wholesale electricity market and prices to industrial users were deregulated but residential
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This note was uploaded on 03/21/2012 for the course ECO ECO2023 taught by Professor Hermbaine during the Winter '09 term at Broward College.

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Lecture 25 - Lecture 25: Energy Prices OPEC and the oil...

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