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.

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Definitions:

Ketone

An organic compound characterized by a carbonyl group (C=O) bonded to two carbon atoms, common in sugars and fragrances.

Hydrazone

A compound formed by the reaction of a hydrazine with a ketone or aldehyde, characterized by a –NHN=C– linkage.

Semicarbazone

Derivatives of semicarbazide that are used as derivatives to characterize aldehydes and ketones, typically involving the formation of crystalline precipitates.

Major Organic Product

The main product produced in the highest quantity from an organic chemical reaction.