Read the following statements - Assertion (A) and Reasoning (R):
Assertion: OPEC closely resembles an example of collusive oligopoly.
Reasoning: OPEC consists of few oil producing companies working together as a cartel.
Assertion: OPEC closely resembles an example of collusive oligopoly.
Reasoning: OPEC consists of few oil producing companies working together as a cartel.
Answer & explanation
Correct answer: option 1
OPEC is Organization of Petroleum Exporting Countries. In collusive oligopoly, firms collude with one another and form cartel mutually taking price and output decisions. OPEC is an international cartel consisting of 13 oil producing firms who fix supply quota and market price of oil. Significance of OPEC is decreasing due to emergence of American oil companies.