Question

Which of the following is LEAST likely to be a reason for firms to form a cartel?

A. to cut back output of the cartel
B. to maximize profits of the cartel
C. to raise competition among firms in the cartel
D. to set common prices among firms in the cartel

Answer 1

The correct answer is letter "C": to raise competition among firms in the cartel.

Step-by-step explanation:

A cartel is a group of companies or countries working together to regulate the price of a single product they produce in common. The cartel makes it impossible for a foreign business to enter the market and demand lower prices. Cartels are, in most cases, not helpful to customers. They generate high prices that remain unchanged until consumers find alternative ways to purchase the same items.

Under such a scenario, cartels are unlikely to be formed to generate more competition among the companies that compose them.