A firm receives the largest profit from cheating on a cartelagreement when:

Question

Quizplus · Accepted Answer

When none of the other cartel members cheat, the firm is able to increase its output and charge a higher price, earning a large profit. However, if all members cheat or expand output, the market price will fall and the profit gained from cheating will be lower. Additionally, the firm's demand curve being more inelastic than other cartel members may provide some profit gain, but it is not as significant as when none of the other cartel members cheat.

A Firm Receives the Largest Profit from Cheating on a Cartelagreement