Once a cartel establishes its profit-maximizing price,
A) entry into the industry of new competitors will not affect the cartel's profits.
B) output changes by cartel members have no effect on the market price.
C) each cartel member is tempted to cheat on the cartel price in order to add to its profit.
D) all cartel members have a strong incentive to adhere to the agreed-upon price.

Question

Quizplus · Accepted Answer

Cartel members are tempted to cheat on the agreed-upon price to increase their individual profits by selling more at a slightly lower price, undermining the cartel's discipline and potentially leading to its collapse.

Once a Cartel Establishes Its Profit-Maximizing Price