When two or more large firms form a cartel, the price of products would_______ and the output would_______________. This collusive behaviour more likely leads to a/an____________ in the level of efficiency.

Question

BlackTom AI · Accepted Answer

Colluding firms behave like a single monopolist, so the cartel restricts output and raises price relative to competitive markets. Relevant concepts: - In perfect competition P = MC and output is higher; a monopolist chooses output where MR = MC, producing less and charging a higher price. - This creates allocative inefficiency (P > MC) and deadweight loss; total surplus falls, so overall efficiency decreases. Step-by-step reasoning with a simple linear example: - Let demand be P = a − bQ and constant marginal cost MC = c. - Competitive equilibrium: set P = MC → a − bQc = c → Qc = (a − c)/b and Pc = c. - Monopolist/cartel: MR = a − 2bQ. Profit-max rule MR = MC → a − 2bQm = c → Qm = (a − c)/(2b). - Compare outputs: Qm = Qc/2, so output decreases (Qm < Qc). - Price under monopoly: Pm = a − bQm = a − b[(a − c)/(2b)] = (a + c)/2. Since (a + c)/2 > c, Pm > Pc. Therefore price increases. - Welfare effect: Because Pm > MC and Qm < Qc, some mutually beneficial trades at prices between MC and demand are lost → deadweight loss → efficiency decreases. Why the correct answer is correct: - Cartel (monopolistic) behavior reduces quantity and raises price compared with competitive outcomes; reduced trades and higher price cause allocative inefficiency and a net loss in total welfare, so the level of efficiency falls. Why other options are incorrect: - Option a claims efficiency increases — wrong because collusion reduces total surplus and creates deadweight loss. - Options c and d claim price decreases and output increases — these are the opposite of the monopolistic/cartel outcome. Therefore the correct choice is b. Increase; decrease; decrease.

When two or more large firms form a cartel, the price of products would_ and the output would_. This collusive behaviour more likely leads to a/an____ in the level of efficiency.单项选择题

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When two or more large firms form a cartel, the price of products would_______ and the output would_______________. This collusive behaviour more likely leads to a/an____________ in the level of efficiency.单项选择题

类似问题

A perfectly competitive firm is said to be more efficient than a monopoly firm because

A perfectly competitive firm is said to be more efficient than a monopoly firm because

According to the video, which market structure category is the car market best described as?

Which market structure has many firms, no market power, a homogenous/identical product and is very easy to enter?

Which market structure has -a small number of firms, each with high level of market power; -high barriers to entry, making it difficult for new firms to enter; and -mutual interdependence among firms?

The threat of competitors’ entering a market is very high in industries that perform a(n) _____ role and in industries where the primary product or service is _____.

Which of the following is not a characteristic of an oligopoly?

更多留学生实用工具

希望你的学习变得更简单

When two or more large firms form a cartel, the price of products would_ and the output would_. This collusive behaviour more likely leads to a/an____ in the level of efficiency.单项选择题

The threat of competitors’ entering a market is very high in industries that perform a(n) _ role and in industries where the primary product or service is _.