If the member of a cartel violates the cartel agreement and sells at a price below the cartel price:
A)the violator will not be able to sell the additional output at a price above his marginal cost.
B)the violator will make a smaller profit per unit that he sells.
C)the violator will face a more elastic demand curve for the additional output.
D)the violator's demand curve will be downward sloping for the additional output.

Question

Quizplus · Accepted Answer

When a cartel member undercuts the cartel price, they face a more elastic demand curve because buyers will be more responsive to the lower price, increasing the quantity demanded for the violator's product.

If the Member of a Cartel Violates the Cartel Agreement