Compared to a Competitive Market, Firms Operating in a Cartel

question 100

Multiple Choice

Compared to a competitive market, firms operating in a cartel will charge a price that is:

• A) higher than the competitive price.
• B) lower than the competitive price.
• C) equal to their marginal cost of production.
• D) equal to their average cost of production.

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Definitions:

Economies of Scale

Economies of scale describe the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Average Cost

The total cost of production divided by the quantity of output, representing the cost per unit of output.

Interest Rate

The cost of borrowing money or the return on investment, expressed as a percentage of the principal.

Market Price

The current price at which a good or service can be bought or sold, determined by supply and demand.