What Happens to the Profit-Maximizing Cartel Price and Quantity If

question 71

Multiple Choice

What happens to the profit-maximizing cartel price and quantity if the marginal cost of production declines?

• A) The sellers are no longer price takers, so the change in marginal cost has no impact on the cartel outcome.
• B) If demand is downward sloping, the optimal cartel price should decline and the market quantity should increase.
• C) The sellers retain the same pricing strategy and capture higher per-unit profits.
• D) The cartel price increases and market quantity declines.

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