Cartels are difficult to maintain because a. the monopoly output is very difficult to determine. b. the number of firms is always large. c. costs to the firms in a cartel are continually rising. d. each firm has an incentive to deviate from its agreed output level.

Question

Business

Devyn

17 May, 01:33

Cartels are difficult to maintain because a. the monopoly output is very difficult to determine. b. the number of firms is always large. c. costs to the firms in a cartel are continually rising. d. each firm has an incentive to deviate from its agreed output level.

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Answers (1)

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Deangelo Bright · Answer 1

The correct answer is option d.

Explanation:

Cartels are generally formed in oligopoly markets. In such markets there are few firms which are interdependent. So, they form cartels to enjoy monopoly power.

Though cartels are generally short lived and difficult to maintain. The reason behind this is that each firm has the incentive to deviate and produce more than their quota in order to capture more market share.

So, option d is the correct answer here.