In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to
A) produce more than its output quota.
B) lower both its price and its output.
C) raise its price above the cooperative price.
D) establish competitive price and output levels.

Question

Quizplus · Accepted Answer

In an oligopoly, firms have an incentive to produce more than their output quota to increase their individual profits, leading to instability in cooperative agreements.

In an Oligopoly, Producers' Agreements to Restrict Output Tend to Be