Explain how collusion makes firms better off. Given the incentives to collude, briefly explain why every industry does not become a cartel
What will be an ideal response?
Collusion makes firms better off because if they act as a single entity, like a monopoly, they can reduce output, increase prices, and increase profits. Among the reasons that every industry doesn't become a cartel are that the high profits caused by collusion will induce new firms to enter the industry; because each member of the cartel has an incentive to "cheat" on the collusive agreement, earning the highest profit by producing more than its share when everyone else sticks with the collusive agreement; and because collusion is illegal in the United States and many other countries.
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If in a market the last unit of output was sold at a price higher than marginal cost,
A) producers are better off producing more. B) consumers are better off if less of the product is sold. C) social welfare is not maximized. D) the unit increased total profit.
Which of the following statements is characteristic of utilitarianism?
a. An extra dollar of income provides higher marginal utility to a poor person than to a rich person. b. Social policies should be created behind a "veil of ignorance." c. Society should strive to maximize the utility of its wealthiest member. d. Equality of opportunity is more important than equality of incomes.