Other things being equal, a firm in a cartel will most likely cheat on a price-fixing agreement by
A) increasing price and restricting its output.
B) organizing promotions of the product.
C) secretly increasing sales to a large number of small customers.
D) secretly lowering price and increasing sales to a few customers.

Question

Quizplus · Accepted Answer

The firm in a cartel will most likely cheat on a price-fixing agreement by secretly lowering prices and increasing sales to a few customers. This way, they can increase their market share and profits without being detected by other cartel members. Option A is incorrect because increasing prices and restricting output would be in violation of the price-fixing agreement. Option B is incorrect because organizing promotions of the product would also be in violation of the agreement. Option C is incorrect because secretly increasing sales to a large number of small customers would be difficult to do without being detected by other cartel members.

Other Things Being Equal, a Firm in a Cartel Will