In an oligopoly with a collusive agreement, the total industry profits will be smallest when
A) the firms act as a monopoly.
B) all firms comply with the agreement.
C) one firm cheats on the agreement and the other firms do not cheat.
D) all firms cheat on the agreement.

Question

Quizplus · Accepted Answer

In an oligopoly with a collusive agreement, if all firms cheat on the agreement, competition increases, leading to lower prices and profits, making the total industry profits smallest compared to other scenarios where collusion might partially or fully hold, reducing competition and maintaining higher profits.

In an Oligopoly with a Collusive Agreement, the Total Industry