The Two Tendencies of a Firm in a Cartel Are

question 75

Multiple Choice

The two tendencies of a firm in a cartel are the incentive to:

• A) cheat to maximize joint profits and the incentive to raise prices.
• B) cheat and avoid collusion and the incentive to raise price to maximize the firm's share of profits.
• C) increase output in order to minimize per-unit cost and the incentive to reduce price in order to maximize joint profit.
• D) cooperate to maximize joint profits and to cheat on the agreement in order to increase the firm's share of the profit.

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Definitions:

Excludable

A feature of a product or service enabling its owner to exclude others from usage unless payment is received.

Property Rights

The legal rights to possess, use, and dispose of assets, including property and intellectual property.

Allocate Resources

The process of assigning available assets, time, and effort to various tasks or purposes in order to achieve specific goals.

Market Failures

Situations where the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.