A Reason Why It Is Difficult for Developing Countries to Maintain

question 21

Multiple Choice

A reason why it is difficult for developing countries to maintain a cartel is that

• A) the elasticity of demand for a cartel's output decreases over time.
• B) producers in the cartel have an economic incentive to cheat.
• C) economic profits discourage other producers from entering the industry.
• D) producers in the cartel have the motivation to lower prices but not to raise prices.
• E) tariffs allow producers in the cartel to produce items that make no profit.

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Definitions:

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