passwella.
Menu

JAMB Economics 2000 Question 32

Question 32

Natural Resources and Petroleum

As a producers' association, the OPEC expects its members to maintain production where marginal cost is

  1. A.greater than price
  2. B.less than price
  3. C.equal to price
  4. D.equal to average cost.
Show the answer and explanation

Answer: B (less than price)

Explanation

OPEC acts like a single monopolist: members limit production so that the price is pushed up. At the restricted output, marginal cost is less than the price.