To maximize cartel profit,members must allocate output so that the marginal cost for the final unit produced by each firm is _____

Question

Quizplus · Accepted Answer

In order to maximize cartel profit, the cartel members must act as a monopolist and restrict output to increase price. To achieve this, they must allocate output in such a way that the marginal cost for the final unit produced by each firm is identical. This is because in a monopoly, output is reduced until the marginal cost equals the marginal revenue. If the marginal cost is different for each firm, the marginal revenue of each firm will also be different, leading to unequal output and lower profits for the cartel as a whole. Therefore, the best choice is A, identical marginal cost.

To Maximize Cartel Profit,members Must Allocate Output So That the Marginal