Once a Cartel Determines the Profit-Maximizing Price

question 47

Multiple Choice

Once a cartel determines the profit-maximizing price,

• A)all members of the cartel have a strong incentive to abide by the agreed-upon price.
• B)each member will face the temptation to cheat on the cartel price to increase its sales and profit.
• C)changes in the output of any member firms will have no impact on the market price.
• D)entry into the industry of new firms will have no impact on the profit of the cartel.
• E)entry into the industry of new firms will raise cartel profit as long as the new firms join the cartel.

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Definitions:

Book Value

The net value of a company's assets minus its liabilities, often used to estimate the company's value if it were to be liquidated.

Accounts Receivable

Money owed to a company by its debtors for goods or services that have been delivered or used, but not yet paid for.

Source of Cash

Various origins from where a company or individual receives cash, including operations, financing activities, investments, and external funding.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.