A cartel is most likely to increase joint profit by:
Correct answer: A. Restricting total output and raising price
- A. Restricting total output and raising price
- B. Expanding total output until price is zero
- C. Making each member a price taker
- D. Removing all barriers to new entry
Explanation
A cartel attempts to act like a monopoly by limiting industry output and charging a higher price. Individual members may have an incentive to secretly increase output, which makes cartels unstable.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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