Why do cartels often break down?
What will be an ideal response?
Cartels often break down because of the incentives for each individual member of the cartel to reduce its own price slightly and increase its production in order to reap more profits than those under a cartel agreement. Also, economic profits due to the cartels often provide an incentive for new firms to enter the market and act as a cheating cartel member.
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Which of the following combinations of changes in government spending and taxes in necessarily expansionary?
A) Increase/Increase B) Increase/Decrease C) Decrease/No change D) Decrease/Increase E) Decrease/Decrease
Customers are most likely buying from a natural monopoly when they purchase
A) aspirin from a generic drug company. B) a laptop computer from Sony. C) a glass of water from the local water company. D) all of the above.