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ECON: MICRO4 (New, Engaging Titles...

4th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781285423548

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ECON: MICRO4 (New, Engaging Titles...

4th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781285423548
Chapter 10, Problem 3.8PA
Textbook Problem
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(Collusion and Cartels) Use revenue and cost curves to illustrate and explain the sense in which a cartel behaves like a monopolist.

To determine

the behavior of a cartel like a monopolist, using the revenue and cost curves.

Concept Introduction:

Cartel is a group of firms that agree to coordinate their production and pricing decisions to reap monopoly profits.

Explanation of Solution

The firms group together to keep their power within the market same and are expecting an increase of power for joining together. Now, each firm can work with the other firm. Thus, they begin to behave like a monopolist. This can be understood with the help of the figure given below.

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