When firms in an illegal market form a cartel,_____.
A)they are able to supply higher quality products
B)it becomes more difficult for police to detect their activities
C)they are able to increase profits by behaving as a monopolist
D)they result in a deadweight loss
E)they rely on goodwill to ensure the stability of the cartel

Question

Quizplus · Accepted Answer

Cartels allow firms in an illegal market to coordinate their actions and behave as a monopolist, resulting in higher profits. This is because they can control the supply and price of their illegal product, which can lead to higher prices and reduced output. However, cartels may also attract the attention of law enforcement authorities, making it more difficult for them to continue their illegal activities. Therefore, while cartels may bring short-term benefits, they can result in long-term costs, such as increased regulation and penalties.

When Firms in an Illegal Market Form a Cartel,_____