In cartels ?
Correct answer: B. There may be an incentive to cheat
- A. Each individual firm profit maximizes
- B. There may be an incentive to cheat
- C. The industry as a whole is loss making
- D. There is no need to police agreements
Explanation
Cartel members agree to restrict competition, but each firm can gain extra sales by secretly cutting price or exceeding its quota. This incentive to cheat is why cartels need monitoring and enforcement.
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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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