The incentive to cheat is strong in a cartel because
A) each firm can increase its output and thus its profit by cutting price.
B) the marginal revenue is less than marginal cost at the profit-maximizing price set by the cartel.
C) there is a significant lack of government regulation of cartels,especially those in worldwide production.
D) the costs of production are the same for each firm,but the product demand differs.
E) each firm could be bought out by other firms.

Question

Quizplus · Accepted Answer

Each firm in a cartel can increase its profit by secretly cutting prices and increasing output, as the cartel's agreed price is typically above the competitive level.

The Incentive to Cheat Is Strong in a Cartel Because