If a cartel is working properly,its firms will likely be producing where (MC_i is each firm i's marginal cost,MR is market marginal revenue,and P is price): A) MC_i = MR. B) MC_i MR. C) MC_i

Question

If a cartel is working properly,its firms will likely be producing where (MC_i is each firm i's marginal cost,MR is market marginal revenue,and P is price): A) MC_i = MR. B) MC_i > MR. C) MC_i < MR. D) P = MR. E) P < MR.

Quizplus · Accepted Answer

In a cartel, firms collude to reduce output and increase price, which increases their profit. For this to work, the firms must produce where their marginal cost equals the market's marginal revenue, which is the same for all firms in a monopoly or cartel. Therefore, the correct choice is A, where the individual firm's marginal cost equals the market's marginal revenue.

If a Cartel Is Working Properly,its Firms Will Likely Be