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.

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