Cartel agreements are more likely to break down when

Question

Quizplus · Accepted Answer

Cartel agreements are more likely to break down when new firms enter the market because it increases competition and decreases each participating firm's market share and profits. When there are few variations in market demand, it may be easier for the cartel to maintain prices and output levels. If participating firms earn huge profits, it may actually strengthen the cartel as all firms are benefiting, but it could also increase the likelihood of cheating and breaking the agreement. Therefore, B is the best choice as it directly relates to the stability of the cartel agreement.

Cartel Agreements Are More Likely to Break Down When