A Reason Why It Is Difficult for Producers to Maintain

question 261

Multiple Choice

A reason why it is difficult for producers to maintain a cartel is that:

• A) The elasticity of demand for the cartel's output decreases over time
• B) Producers in the cartel have the economic incentive to cheat
• C) Economic profits discourage other producers from entering the industry
• D) Producers in the cartel have the motivation to lower price but not to raise price

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Definitions:

Trade-Off

A choice made in a given situation where one aspect of a set or design is reduced or forfeited to improve other elements.

Opportunity Cost

The dropping of possible gains that could come from other alternatives when a specific one is chosen.

Production Technology

The methods and processes used to convert inputs into outputs (goods or services).

Corn

A cereal plant that yields large grains, or kernels, set in rows on a cob; widely grown for food, fodder, and biofuel.