Explain how collusion makes firms better off. Given the incentives to collude, briefly explain why every industry does not become a cartel
What will be an ideal response?
Collusion makes firms better off because if they act as a single entity, like a monopoly, they can reduce output, increase prices, and increase profits. Among the reasons that every industry doesn't become a cartel are that the high profits caused by collusion will induce new firms to enter the industry; because each member of the cartel has an incentive to "cheat" on the collusive agreement, earning the highest profit by producing more than its share when everyone else sticks with the collusive agreement; and because collusion is illegal in the United States and many other countries.
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A) the money supply will decrease. B) output will decrease. C) the exchange rate will increase. D) the exchange rate will decrease. E) there will be no effect.
Average variable costs:
A. always trend upward as output increases. B. always trend downward as output increases. C. decrease, then increase as output increases. D. increase, then decrease as output increases.
If people use quartz as a medium of exchange, then they: a. have a barter economy
b. are using commodity money. c. are using token money. d. are using legal tender. e. are using fiat money.
The law of demand refers to the
a. inverse relationship between the price of a good and the willingness of consumers to buy it. b. price increase that results from an increase in demand for a good of limited supply. c. inverse relationship between the price of a good and the quantity offered for sale. d. increase in the quantity of a good available when its price increases.