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Question

a. If there were many suppliers of diamonds, what would be the

price and quantity?

b. If there were only one supplier of diamonds, what would be the

price and quantity?

c. If Russia and South Africa formed a cartel, what would be the

price and quantity? If the countries split the market evenly, what

would be South Africa's production and profit? What would

happen to South Africa's profit if it increased its production by

while Russia stuck to the cartel agreement?

d. Use your answers to part (c) to explain why cartel agreements

are often not successful.

Fig: 1