Firms operating in a cartel have a large incentive to cheat on the agreement by:
A) lowering prices and increasing production.
B) lowering both prices and production.
C) raising prices and increasing production.
D) raising prices and lowering production.

Question

Quizplus · Accepted Answer

Cartel members have an incentive to cheat by lowering prices and increasing production to capture a larger market share and increase profits, despite the agreement to restrict output and keep prices high.

Firms Operating in a Cartel Have a Large Incentive to Cheat