The incentive to cheat is strong in a cartel because:
A) each firm can increase its output and thus its profits by cutting price.
B) the marginal revenue for an individual firm is greater than marginal cost at the profit-maximizing price set by the cartel.
C) there is a significant lack of government regulation of cartels,especially those in worldwide production.
D) the costs of production are the same for each firm,but the product demand differs.

Question

Quizplus · Accepted Answer

Each firm in a cartel can increase its profits by secretly cutting prices and increasing output, as the cartel's agreed price is typically above the competitive level.

The Incentive to Cheat Is Strong in a Cartel Because