Two firms decide to form a cartel and collude in a way that maximizes industry profits.Each firm has zero production costs and each firm is given a positive output quota by the cartel.Which of the following statements is not true?
A)Each firm would want to produce more than its quota if it knew that the other would continue to produce at its quota.
B)The price elasticity of demand will be 21 at the output level chosen.
C)Output would be lower than if the firms behaved as Cournot firms.
D)Output would be lower than if the firms behaved as competitors.
E)All of the other statements are false.

Question

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The Answer of Two firms decide to form a cartel and collude in a way that maximizes industry profits.Each firm has zero production costs and each firm is given a positive output quota by the cartel.Which of the following statements is not true?
A)Each firm would want to produce more than its quota if it knew that the other would continue to produce at its quota.
B)The price elasticity of demand will be 21 at the output level chosen.
C)Output would be lower than if the firms behaved as Cournot firms.
D)Output would be lower than if the firms behaved as competitors.
E)All of the other statements are false.

Two Firms Decide to Form a Cartel and Collude in a Way