Collusion Makes Firms Better Off Because If They Act as a Single

question 101

Multiple Choice

Collusion makes firms better off because if they act as a single entity (a cartel) they can reduce output and increase their prices and profits.But some cartels have failed and others are unstable.Which of the following is a reason why cartels often break down?

• A)Most cartels do not have a dominant strategy.
• B)When a cartel is profitable, the amount of competition it faces increases.
• C)Members of a cartel may resent having to share their profits equally.
• D)Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement.

Recognize and analyze different types of utility functions and their implications for consumer behavior.

Calculate consumer's optimal choice given budget constraints and prices.

Identify and explain the impact of income and price changes on consumer's demand.

Define and interpret key concepts such as Engel curves, indifference curves, and budget lines.

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Definitions:

Balance Sheet

A report detailing a company's assets, liabilities, and equity of shareholders at a certain date.

Net Profit/Pretax Profit Ratio

A financial metric that compares the net profitability of a business to its earnings before taxes, indicating the portion of income retained after accounting for all expenses.

Leverage Ratio

A financial ratio that measures the amount of debt used in a company's financing structure relative to its equity or other assets.

Pretax Profit/EBIT

Earnings before interest and taxes, a measure of a company's profitability that excludes interest and income tax expenses.