In a Cartel

question 6

Multiple Choice

In a cartel,

• A) each firm has an incentive to raise its price above the level set by the cartel.
• B) each firm has an incentive to lower its price below the level set by the cartel.
• C) each firm has an incentive to decrease its own production below the level set by the cartel.
• D) the firms' marginal cost equals the price set by the cartel.

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Definitions:

Price

The measure of money anticipated, obligatory, or tendered in payment towards an item.

Equilibrium Price

The cost at which the amount of a product or service that consumers want to buy matches the amount that producers are willing to sell.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where market supply and demand balance.

Quantity Demanded

The collective measure of a commodity or service that people are eager and have the means to purchase at an identified price level.