There exists an incentive to cheat on a collusive agreement as long as
A)price equals marginal cost.
B)price equals marginal revenue.
C)price exceeds marginal cost.
D)price is above minimum average total cost.
E)the market is perfectly competitive.

Question

Quizplus · Accepted Answer

If the price exceeds marginal cost, firms have an incentive to produce more and earn additional profits by cheating on the agreement. This is because producing more will increase their profits even after facing the punishment for cheating. As a result, collusion is less likely to be successful when the price exceeds marginal cost.

There Exists an Incentive to Cheat on a Collusive Agreement