Which of the Following Best Explains Why Cartel Agreements Are

question 189

Multiple Choice

Which of the following best explains why cartel agreements are hard to maintain?

• A) Each firm in the cartel has the incentive to raise prices and earn larger profits.
• B) Each firm in the cartel has the incentive to increase production and earn larger profits.
• C) Cartels are typically very profitable for firms in the short run, but not in the long run.
• D) It is hard for each firm in the cartel to maintain a level of production equal to that of the other firms.

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Definitions:

Creativity

The use of imagination or original ideas to create something; inventiveness.

Innovation

The creation and development of a new product or service.

Participation Error

The bias or error that can occur in research or decision-making processes when not all relevant parties are included or accurately represented.

Framing Error

The tendency to highlight certain aspects of a situation depending on whether they are positive or negative to solve a problem while ignoring other aspects.