Which of the following best describes the role of OPEC as a cartel in the context of oligopoly market structures?

• A. OPEC is a competitive firm that sets prices independently of other oil producers.
• B. OPEC coordinates oil production among member countries to influence global oil prices.
• C. OPEC is a government agency that regulates oil prices through taxation.
• D. OPEC is a monopoly that controls all oil production worldwide.

Answer: (B)

Verified step by step guidance

1. Understand the definition of a cartel: A cartel is a group of independent producers who collaborate to control production and influence prices, rather than competing against each other.
2. Recognize the market structure involved: OPEC operates in an oligopoly market structure where a few large producers dominate the market, making coordination possible and impactful.
3. Analyze OPEC's behavior: OPEC members coordinate their oil production levels to manage supply, which in turn affects global oil prices, rather than setting prices independently or competing aggressively.
4. Distinguish OPEC from other entities: OPEC is not a single competitive firm, a government agency, or a monopoly controlling all oil production, but a coalition of countries acting collectively.
5. Conclude that the best description is that OPEC coordinates oil production among member countries to influence global oil prices, fitting the role of a cartel in an oligopoly.