In imperfectly competitive industries,producers' agreements to restrict output tend to be unstable because each firm has an incentive to
A) produce more than its output quota.
B) lower both its price and its output.
C) raise the price above the cooperative price.
D) establish competitive price and output levels.
E) buy out other firms.

Question

Quizplus · Accepted Answer

Each firm has an incentive to produce more than its output quota to increase its own profits, leading to instability in the agreement.

In Imperfectly Competitive Industries,producers' Agreements to Restrict Output Tend to Be