The likelihood of a cartel being successful is greater when

a. firms are producing a differentiated, rather than a homogeneous, product.

b. the number of firms involved is relatively large.

c. cost and demand curves of various participants are very similar.

d. the economy is in the recession phase of the business cycle.

Question

Yair Pratt

Business

15 July, 11:14

The likelihood of a cartel being successful is greater when

a. firms are producing a differentiated, rather than a homogeneous, product.

b. the number of firms involved is relatively large.

c. cost and demand curves of various participants are very similar.

d. the economy is in the recession phase of the business cycle.

+5

Answers (1)

Know the Answer?

Emmett Warren · Answer 1

c. cost and demand curves of various participants are very similar.

Explanation:

A cartel is formed when a group of businesses come together and work to protect their interests. When cartels are formed they can peg prices for their members so that there will be no price competition.

Cartels will be more successful when the firm's involved have similar demand and cost curves. If however some of them have demand and cost curves that give them competitive advantage over others, they will not want to be part of the cartel as they can make profit by themselves.