Question

If three firms of similar sizes join to form a cartel, then it is most likely thatA) they will charge a common, higher market price.B) they will collectively produce more than before.C) all three firms will stop producing.D) all three firms will earn zero profits.

Answer 1

Correct Statement is A

Step-by-step explanation:

Cartel is defined as a group formed by the producers or distributors of like products, in order to ensure the selling price of a product so that they earn the profits, generally cartel creates a kind of monopoly in the market, and then all the companies form a decision that they will not sell the product below such rate.

Thus, it will ensure the profit for the companies under cartel.

As the companies under cartel will charge higher price than the market price,

Therefore, Statement A is Correct