A cartel is a situation where firms in the industry
A) have an agreement to restrict output.
B) agree to produce identical products.
C) obey the rules of dominant firm price leadership.
D) experience the pain of a kinked demand curve.
E) have a barometric price leader

Question

Quizplus · Accepted Answer

A cartel is formed when firms in an industry collude to restrict output in order to drive up prices and maximize profits. This involves an agreement between the participating firms to limit their production, thereby reducing supply and increasing the market power of the remaining firms. The purpose of a cartel is to create a monopolistic environment where prices are artificially inflated and competition is suppressed.

A Cartel Is a Situation Where Firms in the Industry