Which of the following describes how cartel members cheat?
A) They use inferior inputs in production to save money.
B) They steal production technologies from other firms.
C) They produce more output than they promised.
D) They fail to declare profits earned in foreign countries to avoid paying taxes.

Question

Quizplus · Accepted Answer

Cartel members may agree to limit their production in order to drive up prices and profits. However, individual members may cheat by producing more output than they agreed to, which can disrupt the cartel’s pricing strategy and reduce profits for all members.

Answer: A 
 Cartel members may also cheat by using lower quality or cheaper inputs in production in order to reduce their costs and increase profits. This can lead to lower quality outputs and harm the cartel’s reputation, but individual members may prioritize their own profits over the success of the cartel as a whole.

Answer: B and D are possible ways that cartel members may cheat, but they are less common than cheating on output levels or inputs in production.

Which of the Following Describes How Cartel Members Cheat