In a cartel,
A) each firm has an incentive to raise its price above the level set by the cartel.
B) each firm has an incentive to lower its price below the level set by the cartel.
C) each firm has an incentive to decrease its own production below the level set by the cartel.
D) the firms' marginal cost equals the price set by the cartel.

Question

Quizplus · Accepted Answer

In a cartel, firms agree to fix prices or output to maximize collective profits, but each firm has an individual incentive to lower its price below the cartel's agreed price to increase its own market share and profits, undermining the cartel's agreement.

In a Cartel