Explain how a large number of firms in the industry and product heterogeneity affect the likelihood of cartel success.
What will be an ideal response?
Cartel cheating is more likely if there are many firms, as it’s difficult to monitor an agreement and see when sales are lost to a rival. Product heterogeneity also adds to cartel difficulties, since firms can vary quality to attract customers at a given price. If all firms sell an identical product, cheating is easier to detect.
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Suppose India and France have the same PPF, shown in the figure above. Based on their current production points, India's most likely future PPF is ________ and France's most likely future PPF is ________
A) PPF1; PPF1 B) PPF2; PPF2 C) PPF0; PPF0 D) PPF2; PPF1 E) PPF1; PPF2
Which of the following statements is true?
a. Monopoly results in smaller output and a higher price than would be the case under perfect competition. b. The monopolist produces at an output where P > MC and the marginal value to society of the last unit produced is greater than its marginal cost. c. The monopoly is not producing enough output from society's standpoint. d. Monopoly may lead to greater concentration of economic power and could retard innovation. e. All of these statements are true.