Question

A firm receives the largest profit from cheating on a cartel agreement when:

a.all members of the cartel cheat.
b.none of the other cartel members cheats.
c.all cartel members expand output.
d.its demand curve is more inelastic than other cartel members.

Answer 1

A firm receives the largest profit from cheating on a cartel agreement when all members of the cartel cheat and when there is collusion to expand output and raise prices. A more inelastic demand curve also contributes to higher profits.

Step-by-step explanation:

In an oligopoly cartel, a firm receives the largest profit from cheating on the cartel agreement when all members of the cartel cheat. The firm benefits the most when there is collusion among all members to expand output and raise prices. Additionally, the firm's demand curve being more inelastic than the other cartel members also contributes to higher profits from cheating.