When the market demand curve is relatively inelastic,

Question

Quizplus · Accepted Answer

When the market demand curve is relatively inelastic, the higher the price the cartel sets, the greater the benefits to the cartel because consumers will continue to buy the product even at higher prices, resulting in higher profits for the cartel. It is still illegal for a cartel to form, and penalties will not necessarily be lower. It is unrealistic for a cartel to form only if profits will be lower than when firms compete independently, regardless of the elasticity of demand.

When the Market Demand Curve Is Relatively Inelastic