BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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All the firms in the industry acting as one to set a monopoly price
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Each producer acting independently of others
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Firms following the low-price firm in the industry
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Differences in cost of production discouraging individual firms from cheating
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Detailed explanation-1: -A cartel occurs when two or more firms (usually within an oligopoly) enter into agreements to restrict the market supply and thereby fix the price of a product in a particular industry. The aim is to charge a high cartel price and maximise joint profits for cartel members.
Detailed explanation-2: -A cartel is a special case of oligopoly when competing firms in an industry collude to create explicit, formal agreements to fix prices and production quantities. In theory, a cartel can be formed in any industry but it is only practical in an oligopoly where there is a small number of firms.
Detailed explanation-3: -A cartel is a group of producers who come together to try to act like a monopoly. They do this by colluding with one another and artificially limiting the quantity supplied of whatever good they produce. To this though they must all act together and trust each other that they won’t break their agreements.
Detailed explanation-4: -Cartels, on the other hand, are made up of at least two, and often several, firms; thus, they cannot be monopolies. Cartels can, however, act as monopolies. Economists and market observers realize that monopolies have market power because they are the sole providers of particular goods or services.