Which of the following the best example of a cartel?
A)An association of tobacco companies that attempts to influence anti-tobacco legislation
B)A labor union that raises wages above competitive level by restricting the supply of labor
C)A group of countries that sign an agreement to lower trade barriers and exchange goods and services
D)Firms that register their headquarters in the Cayman Islands in order to evade corporate taxes

Question

Quizplus · Accepted Answer

A labor union restricting the supply of labor in order to raise wages above the competitive level is a classic example of a cartel behavior. The labor union acts as a coordinating entity that restricts competition among its members, just like a cartel restricts competition among firms.

A) An association of tobacco companies attempting to influence anti-tobacco legislation might be an example of collective lobbying, but it is not a cartel. 
C) A group of countries that sign an agreement to lower trade barriers and exchange goods and services can be an example of regional integration, but it is not a cartel unless the countries coordinate to restrict competition among their firms. 
D) Firms registering their headquarters in tax havens to evade taxes might be an example of tax avoidance or tax planning, but it is not a cartel.

Which of the Following the Best Example of a Cartel