One of the Reasons Cartels Are Considered Unstable Is That

question 121

Multiple Choice

One of the reasons cartels are considered unstable is that

• A)member firms reduce their investment,thereby becoming uncompetitive over time.
• B)it is inefficient to manage individual firms collectively.
• C)there are wide fluctuations in price as cartel members vary their output.
• D)consumers seek out substitutes to the cartel product.
• E)individual members of the cartel have an incentive to violate the cartel agreement.

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Definitions:

Market Demand

The total demand for a product or service aggregated across all individuals in the market at various price levels.

Short-Run Costs

Costs that vary depending on the level of production or output in the short term, where some factors of production are fixed.

Zero Economic Profits

A situation in which a firm's total revenues are exactly equal to its total costs, including opportunity costs, indicating neither an economic profit nor loss.

Long-Run Equilibrium

A market state where all producers and consumers have fully adjusted to all changes, and there are no forces causing further adjustments.