The output of a cartel that maximizes profits is closest to the equilibrium output of:
A)a perfectly competitive firm.
B)a monopoly.
C)a monopolistically competitive firm.
D)an oligopoly.

Question

Quizplus · Accepted Answer

The output of a cartel is similar to that of a monopoly because both have the ability to restrict output to raise prices and increase profits. In a monopolistic market, a single firm has complete control over the market and can charge a high price for its product due to the absence of competition. Similarly, in a cartel, a group of firms act like a single entity and restrict output to maintain a high price. Therefore, the output of a cartel that maximizes profits is closest to the equilibrium output of a monopoly.

The Output of a Cartel That Maximizes Profits Is Closest