Cartel members have an incentive to cheat on the cartel because:
A) the cartel does not maximize profits.
B) the cartel price is the competitive price.
C) each member's output quota is too high.
D) each member's MR is not equal to the cartel's MC.
E) the industry profit would be higher under competitive conditions.

Question

Quizplus · Accepted Answer

Cartel members have an incentive to cheat because each member's marginal revenue (MR) is not equal to the cartel's marginal cost (MC), leading them to produce more than their quota to increase individual profits.

Cartel Members Have an Incentive to Cheat on the Cartel