A reason why it is difficult for producers to maintain a cartel is that:
A) The elasticity of demand for the cartel's output decreases over time
B) Producers in the cartel have the economic incentive to cheat
C) Economic profits discourage other producers from entering the industry
D) Producers in the cartel have the motivation to lower price but not to raise price

Question

Quizplus · Accepted Answer

Producers in a cartel have an economic incentive to cheat and produce more than their agreed-upon quota to increase their profits. This cheating behavior weakens the cartel's power and makes it difficult to maintain the agreed-upon high price levels. Therefore, option B is the correct answer. The other options are not the main reasons why it is difficult for producers to maintain a cartel.

A Reason Why It Is Difficult for Producers to Maintain