Collusive agreements are typically difficult for cartels to maintain because each firm can increase profits by:
A)producing more output than the quantity that maximizes joint cartel profits.
B)producing less output than the quantity that maximizes joint cartel profits.
C)increasing the price above the price that maximizes joint cartel profits.
D)engaging in less advertising than the level of advertising that maximizes joint cartel profits.

Question

Quizplus · Accepted Answer

Each firm in a cartel has an incentive to cheat by producing more output than agreed upon, as this can increase their individual profits, even though it may reduce joint cartel profits.

Collusive Agreements Are Typically Difficult for Cartels to Maintain Because