Another possible source of why cartels break down is the growth potential of the industry. Although industries with a lot of potential are more willing to invest in the time to form a collusive agreement, such growth potential also deters them from making this investment. Why would that be?
A) High-growth industries are more likely to be monitored by the government.
B) High-growth industries are less likely to face an inelastic demand curve.
C) High-growth industries are more likely to have lots of entrants.
D) High-growth industries are less likely to have the support of the government.

Question

Quizplus · Accepted Answer

In high-growth industries, there tend to be more entrants looking to capture a share of the market, which increases the difficulty of maintaining a collusive agreement among a large number of participants. Therefore, the potential for many entrants is a deterrent to forming a cartel.

Another Possible Source of Why Cartels Break Down Is the Growth