Once a cartel determines the profit-maximizing price
A) each firm faces the temptation to cheat by raising its price.
B) each firm faces the temptation to cheat by lowering its price.
C) changes in the output of any member firm will not affect the market price.
D) entry into the industry by rival firms will not affect the profit of the cartel.

Question

Quizplus · Accepted Answer

Each firm in a cartel faces the temptation to cheat by lowering its price to increase its individual sales and profits, even though this undermines the cartel's agreed-upon price.

Once a Cartel Determines the Profit-Maximizing Price