A Collusive Agreement to Form a Cartel Is Difficult to Maintain

question 127

Multiple Choice

A collusive agreement to form a cartel is difficult to maintain because

• A) each member firm can increase its own profits by cutting its price and selling more.
• B) forming a cartel is legal but frowned upon throughout the world.
• C) supply will decrease because of the high cartel price.
• D) demanders will rebel once they realize a cartel has been formed.
• E) each firm can increase its profit if it decreases its production even more than the decrease set by the cartel.

---

Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting the goods' sensitivity to price changes.

New York

A state in the northeastern United States, known for its significant cultural, financial, and political influence, as well as being home to New York City, one of the largest and most iconic cities globally.

Florida

A southeastern U.S. state, known for its beaches, theme parks, and warm climate.

Midpoint Formula

A method used in economics to calculate the elasticity of a demand or supply curve, representing the percentage change in quantity demanded or supplied relative to a percentage change in price.