To maximize joint profits,a cartel will set the market price and output such that

Question

Quizplus · Accepted Answer

In order to maximize joint profits, a cartel must consider the market as a whole and set the market price and output accordingly. The market's marginal revenue should equal the market's marginal cost because this ensures that the cartel is producing the optimal quantity that maximizes profits for all firms in the cartel. If the marginal revenue is too low, then profits will be lower than they could be; if it is too high, there may be excess capacity and some firms may be producing at a loss. Therefore, choice B is the best option.

To Maximize Joint Profits,a Cartel Will Set the Market Price