When oligopolistic firms in an industry form a cartel, then it is most likely that
A) both industry output and prices will increase.
B) both industry output and prices will decrease.
C) industry output will increase while prices will decrease.
D) industry output will decrease while prices will increase.

Question

Quizplus · Accepted Answer

When oligopolistic firms form a cartel, they collude in order to restrict output and raise prices. This leads to a decrease in industry output while prices increase. Therefore, the correct choice is D.

When Oligopolistic Firms in an Industry Form a Cartel, Then