To maximize joint profits,a cartel must determine the level of output at which:

Question

Quizplus · Accepted Answer

Joint profits are maximized when the cartel produces the output at which marginal revenue is equal to joint marginal cost. This ensures that each member of the cartel is producing at their respective marginal cost, while also maximizing total revenue for the group. Option A, which suggests setting output where joint marginal revenue equals the marginal cost of the largest member, would result in inefficiency and potentially lower overall profits. Similarly, option D, which suggests using the smallest member's marginal cost, would not guarantee that each member is producing at their respective marginal cost. Option C, which suggests minimizing the horizontally summed marginal cost curves of the members, may result in some members producing at a loss or not producing at all, which would ultimately lower overall profits.

To Maximize Joint Profits,a Cartel Must Determine the Level of Output