A Cartel Member Has the Incentive to Cheat on the Cartel

question 50

Multiple Choice

A cartel member has the incentive to cheat on the cartel agreement because

• A) it fears that other members may also cheat on the agreement.
• B) the cartel prevents the member from charging the monopoly price.
• C) undercutting the cartel price will increase the cartel member's profit.
• D) the cartel outcome is not Pareto optimal for the cartel members.

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Definitions:

Comparative Advantage

an economic principle that posits a country or entity can produce a particular good or service at a lower opportunity cost than its trading partners, leading to beneficial trade.

Medium Of Exchange

Anything that facilitates trade by being generally accepted by all parties in payment for goods or services.

Facilitates Trade

Actions or policies designed to make trade between countries or parties easier, typically through reducing barriers such as tariffs and quotas.

Barter

The direct exchange of one product for another without using money.