Please, I need a correct answer and clear explanation of the question. open imag
ID: 1118659 • Letter: P
Question
Please, I need a correct answer and clear explanation of the question. open image for a clear view. Thanks,
Question 8
Cartels are typically subject to cheating by their members because
barriers to entry do not exist so new entrants will join.
product differentiation allows the firms in the cartel to cheat.
if the other firms stick to the agreement, a firm can increase its profits by cutting its price.
the U.S. Justice Department will punish any cartel agreement before the cartel has had a chance to operate.
A.barriers to entry do not exist so new entrants will join.
B.product differentiation allows the firms in the cartel to cheat.
C.if the other firms stick to the agreement, a firm can increase its profits by cutting its price.
D.the U.S. Justice Department will punish any cartel agreement before the cartel has had a chance to operate.
Explanation / Answer
Answer
Option C
if the other firms stick to the agreement, a firm can increase its profits by cutting its price.
the cartel is a private agreement between firm to keep the price high and earn a profit like a monopoly but if one firm cheats then the firm can earn more profit than others so every frim want to cheat because the cartel is not legal which means that no one will punish for cheating on the cartel.