A cartel's marginal cost curve is the
A)highest of all the individual firms' marginal cost curves
B)lowest of all the individual firms' marginal cost curves
C)horizontal sum of all the individual firms' marginal cost curves
D)average of all the individual firms' marginal cost curves
E)product of all the individual firms' marginal cost curves

Question

Quizplus · Accepted Answer

A cartel is a group of firms that collude to act like a monopoly, thus limiting their output to increase prices. In order to determine the optimal output level for the cartel, they must consider the combined marginal cost curve of all firms involved. This is because each firm's individual marginal cost curve is not relevant since they are working together to set output levels. The cartel's marginal cost curve is therefore equal to the horizontal sum of all the individual firms' marginal cost curves.

A Cartel's Marginal Cost Curve Is the