If an oligopolist is part of a cartel that is collectively producing at the monopoly level of output, then the oligopolist, being self-interested, will:
A)lower production and drive up prices
B)increase production and push prices down
C)do nothing, thus allowing the cartel to realise monopoly profits
D)do none of the above

Question

Quizplus · Accepted Answer

In a cartel that is producing at the monopoly level of output, each oligopolist has an incentive to increase production slightly to gain a larger share of the total profits. This action pushes prices down because it increases the total supply beyond the monopoly level, contrary to the cartel's agreement to restrict output to maximize joint profits.

If an Oligopolist Is Part of a Cartel That Is