If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to increase production with the aim of
A)increasing prices.
B)increasing profits for the group of firms as a whole.
C)increasing profits for itself, regardless of the impact on profits for the group of firms as a whole.
D)decreasing costs of production.

Question

Quizplus · Accepted Answer

If the oligopolist increases production in a cartel that is collectively producing the monopoly level of output, the total market supply will increase, leading to a decrease in the market price. As a result, the profits for the group of firms as a whole will decrease. However, the oligopolist can increase its profits by producing more and capturing a larger market share, even if it reduces the profits for the group of firms as a whole. Therefore, the oligopolist has the incentive to increase production for its own profit, regardless of the impact on profits for the group of firms.

If an Oligopolist Is Part of a Cartel That Is