Each firm in a cartel has an incentive to break its word and produce more than the agreed quantity.False

Question

Quizplus · Accepted Answer

Each firm in a cartel has an incentive to cheat and produce more than the agreed quantity in order to increase their profits. However, if one firm cheats, other firms may follow suit, leading to lower prices and reduced profits for all firms in the cartel. Therefore, there is a mutual interest among firms to maintain the agreement and stick to the agreed-upon production levels.

Each Firm in a Cartel Has an Incentive to Break