In an Oligopoly in Which the Firms Have Entered into a Cartel

question 40

Multiple Choice

In an oligopoly in which the firms have entered into a cartel agreement,the Nash equilibrium exhibits which of the following?

• A) firms jointly maximizing profits
• B) the firms cheating on the cartel agreement, which benefits society
• C) production at a price and output level close to monopolistic competition in the long run
• D) the firms cheating on the cartel agreement, which harms society
• E) one firm cheating on the cartel agreement and the other firms complying with the cartel agreement

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Definitions:

Monopolistic Competition

A market structure in which many companies sell products that are similar but not identical, allowing for product differentiation.

Monopolistic Competitor

A market structure where many firms sell products or services that are similar but not identical, allowing for significant differentiation among them.

Local Monopoly

A situation where a single firm has significant control or is the only provider of a product or service in a particular local market, limiting competition.

Drugstore

is a retail shop where medications, as well as other household items and cosmetics, are sold.