Cheating by a member of a cartel ________ consumer surplus and ________ the total economic profit earned by all the firms in the cartel.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

Question

Quizplus · Accepted Answer

Cheating by a member of a cartel increases their own profit, thus increasing consumer surplus for consumers who benefit from lower prices. However, this decreases the total economic profit earned by all the firms in the cartel as the cheating member is producing more and selling at a lower price, causing the other members to lose sales and profits.

Cheating by a Member of a Cartel ________ Consumer Surplus