Boeing and Airbus have entered into a cartel agreement that will enable them to boost their profits.What occurs if Boeing decides to cheat on the agreement?
i.Boeing lowers the price of its airplanes.
ii.The total industry output increases.
iii.The total profits in the airplane industry will decrease.
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii

Question

Quizplus · Accepted Answer

If Boeing cheats on the cartel agreement by lowering the price of its airplanes, it will likely sell more airplanes, increasing the total industry output. However, this action disrupts the cartel's price-fixing strategy, leading to a potential price war or reduced prices overall, which would decrease the total profits in the airplane industry.

Boeing and Airbus Have Entered into a Cartel Agreement That