A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $3,000 per diamond, and the demand for diamonds is described by the following schedule: Price Quantity (Dollars) (Diamonds) 8,000 3,000 7,000 4,000 6,000 5,000 5,000 6,000 4,000 7,000 3,000 8,000 2,000 9,000 1,000 10,000 If there were many suppliers of diamonds, the price would be______ per diamond and the quantity sold would be _______ diamonds. If there were only one supplier of diamonds, the price would be ______ per diamond and the quantity sold would be ______ diamonds. Suppose Russia and South Africa form a cartel. In this case, the price would be _____ per diamond and the total quantity sold would be _____ diamonds. If the countries split the market evenly, South Africa would produce _____ diamonds and earn a profit of _____ .
A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $3,000 per diamond, and the demand for diamonds is described by the following schedule: Price Quantity (Dollars) (Diamonds) 8,000 3,000 7,000 4,000 6,000 5,000 5,000 6,000 4,000 7,000 3,000 8,000 2,000 9,000 1,000 10,000 If there were many suppliers of diamonds, the price would be______ per diamond and the quantity sold would be _______ diamonds. If there were only one supplier of diamonds, the price would be ______ per diamond and the quantity sold would be ______ diamonds. Suppose Russia and South Africa form a cartel. In this case, the price would be _____ per diamond and the total quantity sold would be _____ diamonds. If the countries split the market evenly, South Africa would produce _____ diamonds and earn a profit of _____ .
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $3,000 per diamond, and the demand for diamonds is described by the following schedule:
|
|
Quantity
|
|---|---|
|
(Dollars)
|
(Diamonds)
|
| 8,000 | 3,000 |
| 7,000 | 4,000 |
| 6,000 | 5,000 |
| 5,000 | 6,000 |
| 4,000 | 7,000 |
| 3,000 | 8,000 |
| 2,000 | 9,000 |
| 1,000 | 10,000 |
If there were many suppliers of diamonds, the price would be______ per diamond and the quantity sold would be _______ diamonds.
If there were only one supplier of diamonds, the price would be ______ per diamond and the quantity sold would be ______ diamonds.
Suppose Russia and South Africa form a cartel.
In this case, the price would be _____ per diamond and the total quantity sold would be _____ diamonds. If the countries split the market evenly, South Africa would produce _____ diamonds and earn a profit of _____ .
If South Africa increased its production by 1,000 diamonds while Russia stuck to the cartel agreement, South Africa's profit would _____ to _____ .
Why are cartel agreements often not successful?
a. One party has an incentive to cheat to make more profit.
b. Different firms experience different costs.
c. All parties would make more money if everyone increased production.
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