Cartels often dissolve because
A)their members often set a time limit as to how long the cartel should exist.
B)their members often cheat on the cartel agreements because they have incentive to.
C)their members often find that they do not earn as high profits from the cartel as they had hoped to.
D)firms in a cartel face different costs than firms outside a cartel.

Question

Quizplus · Accepted Answer

Cartel members often cheat on cartel agreements because they have an incentive to do so (i.e. by producing more than their agreed-upon output to earn higher profits). This can lead to the dissolution of the cartel as members stop adhering to the agreements. While the other options may also contribute to the dissolution of a cartel, cheating is a primary reason.

Cartels Often Dissolve Because