Question

Please indicate the correct answer and explain why. Graph as instructed with labels. Thank you1!!

Rice exporters cye cartel to boost prices Price and cost (dollars per pound of rice) Southeast Asia's rice-exporting nations are in talks to create a formal alliance aimed at boosting prices and increasing export revenues. But the previous attempt to form a cartel failed as countries failed to cooperate Source: The Wall Street Joumal, August 23, 2012 2. MC Explain how an Asian profit-maximizing rice cartel would influence the global market for rice and the world price of rice Why might a cartel not boost prices? The graph shows the market for rice. Draw a point at the profit-maximizing price and quantity if the market for rice is perfectly competitive and there is no rice-exporting cartel. Label it 1 Draw a point at the profit-maximizing price and quantity if the rice-exporting nations become a profit-maximizing cartel. Label it 2. 0.7 A rice cartel O A. will not boost prices if the countries cannot cooperate and maintain the agreed production quotas O B. always makes an economic profit in the long run by charging the highest price possible O C. cannot boost prices because it produces the greatest quantity of rice possible O D. cannot boost prices because it determines its profit-maximizing price and quantity in the same manner as a MR 0. 0 10 20 30 40 50 60 70 80 90 100 Quantity (millions of pounds of rice per year) perfectly competitive industry Draw only the objects specified in the question.

Answer 1

Under perfect competition, profit is maximised where P = MC. Point 1 represents equilibrium in perfect competitive market.

Under monopoly, profit is maximised where MR = MC. Equilibrium price is where intersection of MR and MC meets the demand curve and equilibrium quantity is where MR = MC.

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A) will not boost prices if the countries cannot cooperate and maintain the agreed production quotas.