Why do cartels tend to break up?
What will be an ideal response?
There are many reasons, but one of the best is that there is an incentive to cheat. While the cartel maximizes joint profits, individual profit could be increased if the firm could sell more at the cartel price. If everyone does that, output increases and the price falls.
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If a perfectly competitive firm achieves productive efficiency then
A) it will raise its price in order to earn an economic profit. B) the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. C) it is producing at minimum efficient scale. D) it is producing the good it sells at the lowest possible cost.
If the market for a product is broadly defined, then
A) the good has many complements. B) there are few substitutes for the product and the demand for the product is relatively inelastic. C) there are many substitutes for the product and the demand for the product is relatively elastic. D) the expenditure on the good is likely to make up a large share of one's budget.
People scalping tickets for a rock concert can sell their tickets for at least a normal profit
A. when the price set by the concert hall is less than the market equilibrium price. B. when prices are too high. C. only when there is excess supply. D. any time the rock group is popular.
Which of the following industries is the best example of an oligopoly?
A. the restaurant industry B. the corn industry C. the airline industry D. the clothing industry