The High Prices Charged by Cartels

question 218

Multiple Choice

The high prices charged by cartels:

• A) serve as a barrier to entry, allowing the cartel to earn above-normal profits.
• B) give an incentive for new firms to enter the industry, causing an expansion of industry output and lower prices.
• C) reduce the incentive for increased conservation.
• D) All of the answers are correct.

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Definitions:

Stability

The condition of being resistant to change and capable of maintaining a balanced or constant state despite external pressures.

Equilibrium

A state of balance or stability within a system, where competing forces or influences are equal.

Manifest Functions

The recognized and intended consequences of any social pattern, which are explicitly stated and understood by the participants in a social system.

Latent Functions

The unrecognized or unintended consequences of any social pattern, which may contribute to the functioning of a social system.