Stopping a Pandemic Deadlier Than Covid

The WSJ (March 2022) reports that "Rigorous studies have proved that tobacco has a negative price elasticity: For every 10% increase in price, consumption declines by about 4% and by about 8% for children and lower-income groups. About half of that decrease is from people quitting and the other half from people cutting down on the number of cigarettes they smoke."

The report implies that the price elasticity of demand, e, is -4/10 = -0.4 and for children e = -8/10 = -0.8. In both cases, demand is inelastic but not perfectly elastic: e > -1 (and |e| < 1).

Here are some questions.

1. What would happen to the profits earned by cigarette companies if they all raised their prices by 10%?
2. Why doesn't an individual firm raise its price by 10%?

Colluding to Increase the Price of Oil

OPEC+, Russian, the USA, Mexico, and perhaps other countries are trying to reach an agreement to reduce the amount of oil produced (Yahoo, April 2020). The story illustrates the gains from colluding and also the difficulty in achieving and maintaining a collusive agreement.

1. Why would Mexico hold out? What does "hold out" mean?
2. Why would OPEC+ agree to cut production "conditional on the consent of Mexico".
3. What must be true about the demand for oil if a reduction in production worldwide => and increase in total revenues worldwide for the producers. 

Cocoa Cartel

The nations of the governments of Ghana and Ivory Coast formed a cocoa cartel that will charge an extra $400 per metric ton of the crop to give a better deal to farmers (WSJ, Jan. 2020).