Which of the following statements is true for a typical firm in a typical cartel

Question

Which of the following statements is true for a typical firm in a typical cartel? a. "I can never do better for myself than by following agreed-upon cartel policies." b. "If everyone cheats, I'm better off, and so is everyone else in the cartel." c. "If I alone cheat, I'm better off; if everyone cheats, I'm worse off." d. "If I suspect others are planning to cheat, I'll do best for myself by refraining from
cheating."
Cartels are difficult to maintain because: a. there are generally few barriers to entry in oligopoly markets. b. firms have a strong private incentive to cheat on agreements. c. it is difficult to enforce a cartel agreement. d. of all of the above. e. of both b. and c., but not a.
Individual members of a cartel have an incentive to ____ the cartel agreement because pursuit of ____ will maximize individual profit. a. adhere to; self-interest b. cheat on; collective interest
c. cheat on; self-interest d. adhere to; collective interest

Explanation / Answer

1. c. "If I alone cheat, I'm better off; if everyone cheats, I'm worse off." 2. e. of both b. and c. 3. c. cheat on; self-interest

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