It can be difficult for an oligopoly to maintain a cartel because:
A) there are laws that prohibit competing firms from making collusive agreements
B) it is difficult to enforce many cartel agreements
C) many cartel members can improve their profit by individually cheating on the agreement
D) all of the above are true

Question

Quizplus · Accepted Answer

All of the options are true. Laws prohibit collusive agreements, and it is difficult to enforce them. Regardless of these laws, it is challenging to maintain the cartel because the members have the incentive to cheat individually to improve their profits. Therefore, A, B, and C are all valid reasons why it can be difficult for an oligopoly to maintain a cartel.

It Can Be Difficult for an Oligopoly to Maintain a Cartel