The two tendencies of a firm in a cartel are the incentive to:
A) cheat to maximize joint profits and the incentive to raise prices.
B) cheat and avoid collusion and the incentive to raise price to maximize the firm's share of profits.
C) increase output in order to minimize per-unit cost and the incentive to reduce price in order to maximize joint profit.
D) cooperate to maximize joint profits and to cheat on the agreement in order to increase the firm's share of the profit.

Question

Quizplus · Accepted Answer

Firms in a cartel have the dual incentives of cooperating to maximize joint profits by restricting output and raising prices, and the incentive to cheat on the cartel agreement to increase their own share of the profits by secretly lowering prices or increasing output.

The Two Tendencies of a Firm in a Cartel Are