When a cartel member produces more output and lowers prices,:
A) the entire cartel is made more profitable.
B) it receives all the benefits of the increased sales and the other members bear the burden of lower profits.
C) it enjoys only a fraction of the benefits of selling more units.
D) it bears the entire cost of lower prices.

Question

Quizplus · Accepted Answer

When a cartel member produces more output and lowers prices, it receives all the benefits of increased sales and gains market share at the expense of other members. The other members bear the burden of lower profits due to increased competition and lower prices. This is because a cartel operates as a monopoly, with all members agreeing to restrict output and raise prices to maximize profits. When one member deviates from this agreement, it breaks down the cooperation and harms the other members' profits.

When a Cartel Member Produces More Output and Lowers Prices