Question

Assume a group of firms has formed a cartel and the cartel is in engaged in joint profit maximization. As such, each firm, acting in its own interests, has an incentive to expand production up to the point at which:____________.

Answer 1

Answer: The cartel's determined price equals the marginal cost of the product sold.

Explanation: A cartel is a group of persons or firms acting in their own interest,they agree on certain terms like price and profit do the very best to achieve it.Most cartel don't tolerate failures or boycotts from it's members.

In the case highlighted,the cartel works to ensure joint maximization of profit,an individual firm acting in its own interests has an incentive to expand production up to the point where it's marginal cost is equal to the price as agreed by the cartel. Failure to honor this rule will lead to some negative consequences from the cartel and a loss on the part of the firm.