Figure 42.2
-Under the cartel the individual firm's economic profit is (assuming it obeys its quot A.

Question

Quizplus · Accepted Answer

Under the cartel, the firm's economic profit is restricted by the quota they are given. If the firm follows the quota, it can only produce a limited amount of goods and make a profit as shown by the dashed line box. If it produces more than the quota, it risks being penalized by the cartel, so the economic profit would be reduced to zero (shown by the vertical line). Therefore, the smaller of the dashed line boxes represents the maximum economic profit a firm can make under the cartel.

Figure 42.2 -Under the Cartel the Individual Firm's Economic Profit Is (Assuming