Once a Cartel Determines the Profit-Maximizing Price

question 52

Multiple Choice

Once a cartel determines the profit-maximizing price

• A) each firm faces the temptation to cheat by raising its price.
• B) each firm faces the temptation to cheat by lowering its price.
• C) changes in the output of any member firm will not affect the market price.
• D) entry into the industry by rival firms will not affect the profit of the cartel.

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Definitions:

FOB Shipping Point

A shipping term indicating that the buyer assumes ownership and responsibility for goods at the moment they are shipped, with transportation costs borne by the buyer.

Net Income

The total earnings or profit of a company after all expenses have been deducted from revenues.

Physical Inventory

The process of counting and verifying the physical existence of tangible goods and assets held by a business for resale or production purposes.

Dollar-value LIFO Retail Method

This method combines the Last In, First Out (LIFO) inventory method with dollar-value calculations to adjust inventory for changes in price levels, often used in retail.