When all members of a cartel cheat, the cartel:
A) earns monopoly profits.
B) fails to earn monopoly profits.
C) cannot profit.
D) may or may not earn monopoly profits.

Question

Quizplus · Accepted Answer

If all members of the cartel cheat, the cartel fails to earn monopoly profits as the agreement to collude and act like a monopoly in setting prices and output is broken. The members will start to compete with each other, leading to a price war and a reduction in profits. Thus, the cartel will not be able to maintain its market power and earn monopoly profits.

When All Members of a Cartel Cheat, the Cartel