A cartel price will be established at the quantity where
A)total cost equals the industry total revenue.
B)average cost equals the industry revenue.
C)the sum of the members' marginal costs equals industry marginal revenue.
D)marginal cost equals industry price.

Question

Quizplus · Accepted Answer

In a cartel, members agree to work together to limit output and inflate prices. The cartel price will be established where the sum of the members' marginal costs equals industry marginal revenue. This is because at this point, the cartel is producing the quantity where the industry demand intersects with the cartel's supply curve, and any deviation from this price and quantity would result in lower profits for the cartel. Therefore, the cartel will set the price at this point to maximize their profits.

A Cartel Price Will Be Established at the Quantity Where