Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 11, Problem 5QP
To determine
Determine whether the cartel formation is more likely to be in the industry composed of few firms or many firms.
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What is a cartel? Explain the coordination problem it faces.
OPEC is a petroleum cartel, a group of oil producing countries whose objective is to coordinate and unify petroleum policies. What type of market structure is a cartel?
Why are cartel agreements often not successful?
Different firms experience different costs.
All parties would make more money if everyone increased production.
One party has an incentive to cheat to make more profit?
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- Explain in detail how does a cartel operate.arrow_forwardIf a group of sellers could form a cartel, what quantity and price would they try to set?arrow_forwardIf the market described in the accompanying diagram is dominated by a cartel, the loss in total surplus relative to perfectly competitive market conditions will be what?arrow_forward
- Say you are part of the government and found that there is a presence of a cartel; explain the actions should the government take or even the firms present in the industry to break the formation of the cartel?arrow_forwardWhat is the primary reason that cartels fail to work? Becoming a cartel reduces barriers to entry for new firms. It is trivial for one firm to force the other cartel members out of the market and become a monopoly. Firms in a cartel can increase their profits by breaking the agreements made with the other cartel firms. Anti-trust law is quick to break up cartels. Operating as part of a cartel is more expensive and reduces profits.arrow_forwardIf south africa increased its production by 1,000 diamonds while russia stuck to the cartel agreement, south africa's profit would Increase or decrease . Why are cartel agreement often not successful? choose on below: a. one party has an incentive to cheat to make more profit. b. different firms experience different cost c. all parties would make more money if everyone increased productionarrow_forward
- Is it possible that the violent members of the drug cartels can behave like cartels in legitimate markets?arrow_forwardDiscuss a cartel, how it works and problems it faces.arrow_forwardWhy has the OPEC oil cartel succeeded in raising prices substantially while the CIPEC copper cartel has not? What conditions are necessary for successful cartelization?arrow_forward
- Discuss the possible deviations from perfect competition and then focus on oligopolies. How can cartels coordinate to affect markets? What affects antitrust enforcers’ ability to detect cartels? Discuss with reference to one or more examples.arrow_forwardWhich of the following would be cases of cartels? Check All That Apply Ford Motor Company OPEC Major League Baseball Major League Baseball The restaurant industry DeBeers Microsoftarrow_forward
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