Why Do Oligopolists (Or Cartel Members) Have an Incentive to Cheat

question 178

Multiple Choice

Why do oligopolists (or cartel members) have an incentive to cheat on collusive agreements designed to maximize the joint profits of the firms in the industry?

• A) Individual firms could gain if they charged a price greater than the industry's profit-maximizing price.
• B) The industry demand curve is more elastic than the demand curve confronting each of the firms in the industry.
• C) The firms would like to see the industry produce a larger output and charge a lower price.
• D) The demand curve confronting the individual firms is more elastic than the market demand curve for the product.

---

Definitions:

Consequential Damages

Damages that do not directly arise from the breach of a contract but result from the breach's indirect effects.

Inventory

The total amount of goods and materials on hand available for sale to customers in the course of business operations.

Consumer Goods

Items bought for personal use or consumption, including household products, food, and clothing.

Raw Materials

Basic materials obtained in their natural state that are processed to produce goods or provide services.