Why do cartels tend to break up?
What will be an ideal response?
There are many reasons, but one of the best is that there is an incentive to cheat. While the cartel maximizes joint profits, individual profit could be increased if the firm could sell more at the cartel price. If everyone does that, output increases and the price falls.
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The law of diminishing marginal returns states that
A) as both labor and capital are increased, output increases at a decreasing rate. B) output increases at a decreasing rate as more capital is added. C) output decreases at a constant rate as more capital is added. D) as both labor and capital are increased, output does not change. E) output increases at a constant rate as more capital is added.
Which of the following describes the relationship between GDP and government spending?
a. Government spending = GDP + consumption + private investment - exports - imports b. Government spending = GDP - consumption - private investment - exports - imports c. Government spending = GDP - consumption - private investment + exports + imports d. Government spending = GDP - consumption - private investment - exports + imports e. Government spending = GDP + consumption - private investment + exports - imports