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A cartel is often the result of: A
A cartel is often the result of:
A. perfectly competitive firms that agree to produce a homogeneous product.
B. oligopoly competitors that agree to restrict output to maximize joint profits.
C. a monopoly that has been regulated by the government.
D. a natural monopoly that has evolved into a perfectly competitive industry.
E. monopolistically competitive firms that have agreed to earn normal profits in the long run.
Expert Solution
The correct answer is: B). oligopoly competitors that agree to restrict output to maximize joint profits.
Cartel is formed when firms in an oligopoly market collude successfully and fix volume of output for each member in order to drive price up and maximize profit. In United States, cartel are illegal but legal internationally. For example, OPEC is an international cartel in oil industry.
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