Which of the following statements is TRUE?
I. A cartel is a single firm with competitive market power.
II. A cartel is a group of firms that practice price discrimination in competitive markets.
III. A cartel is a group of firms that attempt to reduce market output.
IV. A cartel acts as if it were a monopolist in that market.
A) I only
B) II, III, and IV only
C) II only
D) III and IV only

Question

Quizplus · Accepted Answer

A cartel refers to a group of firms that engage in collusion to limit market output in order to increase prices and profits, effectively acting like a monopolist in that market. Therefore, statement III and IV are true. Statement I is false because a single firm cannot be a cartel. Statement II is also false because price discrimination requires market power, which is inconsistent with the competitive market assumed in the statement.

Which of the Following Statements Is TRUE