cartel Flashcards
1
Q
Profit-maximizing quantity
A
P(Q)Q - minTC(Q)
2
Q
When is a Collusion likely to occur?
A
- High profit margins potential
- Low cooperation costs
- Low enforcement costs
3
Q
What are the characteristics of high profit margins?
A
- Inelastic demand
- Cartel members control most of market
- Entry restrictions
4
Q
What are the characteristics of low cooperation costs?
A
- Small number of firms w/ high market concentration
- Similar production costs
- Little product differentiation
5
Q
Why does Collusion/Cartels happen?
A
To obtain higher overall profits
