Figure 42.2
-Under the cartel the individual firm's economic profit is (assuming that it wants to cheat on its quot A.

Question

Quizplus · Accepted Answer

When a firm cheats on its cartel quota by producing more than the agreed amount, it can sell the extra output at the still-high cartel prices, leading to an increase in its economic profit. This profit is represented by the larger of the dashed line boxes, as it captures the additional revenue from selling more units at a higher price than if the firm adhered to the quota.

Figure 42.2 -Under the Cartel the Individual Firm's Economic Profit Is (Assuming