Being Part of a Cartel Is Generally Good for a Firm

question 96

Multiple Choice

Being part of a cartel is generally good for a firm because it can reduce output while increasing prices and profits.Yet most cartels have failed.Why is this the case?

• A) Cartels lack a dominant strategy.
• B) As the cartel becomes more profitable,competition increases.
• C) Cartel members dislike having to equally share profits.
• D) Each member of the cartel faces an incentive to cheat and produce more,while all of the other members honor the agreement.
• E) Cartel members eventually go out of business.

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Definitions:

Utilization Factor

A measure of how much of a system's capacity is being used compared to its total capacity.

Average Queue Length

The average number of items or people waiting in line to be processed or served over a specific period.

Negative Exponential

A statistical distribution used to model time between independent events that occur continuously at a constant average rate.

Service Times

The duration a customer has to wait before receiving a service or the time taken to deliver a service.