Compared to a competitive market, firms operating in a cartel will charge a price that is:
A) higher than the competitive price.
B) lower than the competitive price.
C) equal to their marginal cost of production.
D) equal to their average cost of production.

Question

Quizplus · Accepted Answer

Firms operating in a cartel collude to reduce output and increase prices, thereby earning higher profits. This leads to a higher price than the competitive price, as they have reduced the level of competition in the market. Therefore, the correct answer is A.

Compared to a Competitive Market, Firms Operating in a Cartel