Cartel Members Have an Incentive to Cheat on the Cartel

question 89

Multiple Choice

Cartel members have an incentive to cheat on the cartel because:

• A) the industry profit would be higher under competitive conditions.
• B) the cartel price is the competitive price.
• C) each member's output quota is too high.
• D) each member's MR is not equal to the cartel's MC.

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Definitions:

Congress

The national legislative body of a country, particularly in the United States, responsible for making laws and comprising two houses: the Senate and the House of Representatives.

Sherman Antitrust Act

A landmark federal statute in the U.S. that prohibits monopolistic business practices, aimed at promoting fair competition for the benefit of consumers.

Monopoly

Monopoly describes the economic condition where one seller dominates the entire market, thus setting prices and product availability without competition.

Trade Restraints

Measures implemented by governments or businesses that restrict international trade, such as tariffs, quotas, and embargoes.