Explain why firms in a cartel might lobby for government regulation.
What will be an ideal response?
Firms form cartels in order to restrict quantity and raise price, but they each have an incentive to over-produce. They would therefore welcome an outside enforcer to enforce the cartel agreement -- and might look to government regulators to accomplish this for them.
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If you decide to go to a movie on a Friday night rather than write a letter to your grandmother, you
A) are willing to deprive your grandmother of a letter simply in order to enjoy a movie. B) place more value on the movie than on your grandmother. C) would rather have fun than fulfill your responsibilities to your relatives. D) none of the above.
Consider a good whose own price elasticity of demand is -0.5 and price elasticity of supply is 1.5. The fraction of a specific tax that will be passed through to consumers is ________
A) 0 B) 0.25 C) 0.5 D) 0.75 E) 1