Question

Cartels are: unstable and tend to lose market power over time. firms that face perfectly elastic demand curves and increase profits by restricting output and raising prices. like monopolies that try to earn normal or competitive profits. extremely powerful and able to keep prices and profits high indefinitely

Answer 1

unstable and tend to lose market power over time.

Step-by-step explanation:

A cartel is a group of countries or firms that have reached an agreement to work together in order to influence or decide market prices for goods and services by controlling sales and the level of production or quantity of output.

In a cartel model, business firms come together to coordinate their business decisions in order to act as a multi-plant monopoly, wherein the quantity of output or level of production is divided into several production plants.

The main purpose of having cartels do this is to make marginal cost (MC) equal to marginal revenue (MR) in the various production plants, so as to create monopoly profits by making sure each plant has its own cost.

Hence, cartels are generally unstable and tend to lose market power over time due to varying economic factors.