A cartel is most likely to occur in
A) perfect competition as firms compete by reducing cost.
B) oligopoly as firms act together to raise prices and increase profits.
C) monopolistic competition where firms collude to increase profits.
D) oligopoly as firms compete to lower price and increase their own profits.
E) monopoly because it faces no competition.

Question

Quizplus · Accepted Answer

Cartels are most likely to occur in an oligopoly market structure where a small number of firms dominate the market and have the ability to collude to raise prices and increase profits. In perfect competition, firms compete by reducing costs to gain a competitive advantage. In monopolistic competition, firms differentiate their products to gain a competitive advantage and do not collude. In a monopoly, there is only one firm and no competition, so there is no need for a cartel.

A Cartel Is Most Likely to Occur in