the following is the question with word (require 1100 words)
QUESTION: Countries that are part of the Organization of the Petroleum Exporting Countries (OPEC) regularly meet each other as well as other oil-producing countries to agree on mutually beneficial levels of oil output.
In early March, faced with uncertainty about how much oil the world economy will consume in the wake of the COVID-19 pandemics, tensions between the producers emerged. In particular, Russia refused to go along with a Saudi-led OPEC proposal to restrict production to allow for a likely decrease in future demand. In response, the Saudis reneged on the three-year agreement with Moscow on production caps, and instead significantly increased their output and offered steep discounts to their buyers.
Outline the theory from the lectures which can be used to model these events. Carefully explain how and why the theory fits the market conditions described above, and discuss how it helps us understand what has happened. Can you think of any other similar real-world example (whether recent or historical)?
(it have to draw a graph about PS,CS)
u should check on my lecture ppt first.
there r the knowledge we got this term:
-welfare implications of monopoly- oligopoly- perfect competitive, price regulation of natural monopoly
-market concentration and collusive behaviour
-horizontal mergers and vertical integration
Also there is a sketch answer about this kind of question:
example QUESTION: Because of the coronavirus outbreak and travel restrictions designed to contain it, most airlines in the world faced a drastic reduction in demand and are already in severe financial difficulties. Without government help, such as tax reductions, subsidies or bailouts, many firms could soon go bankrupt. Only a small number of airlines – those with large cash reserves and ability to cut costs via flexible staff contracts etc. (such as Ryanair) – would be able to survive. Do you think this might have any long-lasting effects on the air travel market once the pandemics subsides? Does your answer mean that governments should, when possible, help the struggling airlines before they fall? Outline the theories from the lectures which can be used to answer the above questions. Carefully explain how and why each theory fits the described market conditions, and discuss how it helps us understand the problem. Can you think of any other similar real-world situation (whether recent or historical)?
SKETCH example ANSWER The answer should focus on the effect of the bankruptcies on market structure: namely on the reduction in the number of competing firms. As such, the impact might be similar to that of a horizontal merger: a reduction in output (tickets sold) but an increase in the price, leading to an increase in PS lower than the accompanying decrease in CS, and so an overall increase in DW (could use a graph here). This increase in market concentration might also lead to monopoly cost inefficiencies etc. Additionally, you should refer to the model of long-run collusion, pointing out that tacit collusion between the remaining small number of carriers will be more likely, especially if they will expect the consumer demand to go back to normal (i.e., increase) in the future. Could also mention the fact that barriers to entry (large start-up costs) would strengthen the collective dominance position of the remaining airlines. In terms of naming another similar situation, you could refer to, for instance, the post-2008 government bailout of certain banks