Which of the following best explains why cartel agreements are hard to maintain?
A) Each firm in the cartel has the incentive to raise prices and earn larger profits.
B) Each firm in the cartel has the incentive to increase production and earn larger profits.
C) Cartels are typically very profitable for firms in the short run, but not in the long run.
D) It is hard for each firm in the cartel to maintain a level of production equal to that of the other firms.

Question

Quizplus · Accepted Answer

Each firm in a cartel has the incentive to increase production beyond the agreed limit to earn larger profits, which undermines the cartel agreement and leads to its potential collapse.

Which of the Following Best Explains Why Cartel Agreements Are