Cartels are difficult to maintain because Select one<\/p>\n
a. costs to the firms in a cartel are continually rising.<\/p>\n
b. each firm has an incentive to deviate from its agreed output level.<\/p>\n
c. the number of firms is always large.<\/p>\n
d. the monopoly output is very difficult to determine<\/p>\n
Answer:-<\/strong> b. Each individual firm has an incentive to diverge from the agreed output level.<\/p>\n Such cartels are difficult to keep because each firm that is a member has an incentive of cheating on how much output it produces in comparison with the originally agreed upon amount. While adhering to the cartel agreement results in high joint profits for a group as such, each firm individually can make more by overproducing its quota.<\/p>\n This is because the other cartel members were still limiting their output which made it possible for the cheating firm to secure a bigger slice of market and make profits that are above those expected from an average cartel.<\/p>\n This profit-maximizing incentive makes cartel arrangements unstable by their very nature, since members look for secret opportunities to betray the agreement in order to gain higher short term profits. Consequently, to maintain a successful cartel involves strict monitoring and punishment for cheating so that it can sustain the cooperation. But still, ensnaring cartels is problematic in the long run as incentives to deviate.<\/p>\n \n","protected":false},"excerpt":{"rendered":" Cartels are difficult to maintain because Select one a. costs to the firms in a cartel are continually rising. b. each firm has an incentive […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[],"yoast_head":"\n