The Incentive to Cheat Is Strong in a Cartel Because

question 157

Multiple Choice

The incentive to cheat is strong in a cartel because

• A) each firm can increase its output and thus its profit by cutting price.
• B) the marginal revenue is less than marginal cost at the profit-maximizing price set by the cartel.
• C) there is a significant lack of government regulation of cartels,especially those in worldwide production.
• D) the costs of production are the same for each firm,but the product demand differs.
• E) each firm could be bought out by other firms.

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Definitions:

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