GK
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: -The correct answer is Oligopoly. A group of independent producers whose intention is to increase their collective profit by various restricting practices such as price fixing, limiting supply, etc. is called as the Cartel.
Detailed explanation-3: -In Western Europe and Japan there are associations of companies that work together to monopolize the production and sale of many goods. These associations are called cartels, and they are legal where they exist. (They are outlawed in the United States.)
Detailed explanation-4: -A cartel is formed when individual suppliers come together and act like a monopolist in order to increase profit. If MC is the joint supply curve of the cartel, profits are maximized at the output Qm, where MC=MR. In contrast, if these firms operate competitively output increases to Qc.