If Three Firms of Similar Sizes Join to Form a Cartel

question 131

Multiple Choice

If three firms of similar sizes join to form a cartel, then it is most likely that

• A) they will charge a common, higher market price.
• B) they will collectively produce more than before.
• C) all three firms will stop producing.
• D) all three firms will earn zero profits.

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Definitions:

Contribution Margin

The income left over after subtracting variable expenses, which is utilized to pay for fixed costs and create earnings.

Sales

Sales refer to the transactions where goods or services are exchanged for money, contributing to a company's revenue.

Sales Mix

The relative distribution of sales among a company’s various products. Also referred to as product mix.

Sales

The revenue generated from selling goods or services over a specific period of time.