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:

Oxidation Number

A figure that represents the total number of electrons an atom either gains or loses in order to form a chemical bond with another atom.

Oxidation Number

A value that represents the total number of electrons that an atom either gains or loses in order to form a chemical bond with another atom.

Cl

Symbol for Chlorine, a reactive, yellow-green gas at room temperature, belonging to the halogen group in the periodic table, with applications in water purification, disinfectants, and bleach.

Elemental Metals

A group of elements that share properties such as high electrical conductivity, malleability, and a shiny appearance.