Why would firms in an oligopoly want to form a cartel? A cartel provides benefit

Question

Why would firms in an oligopoly want to form a cartel?

A cartel provides benefits to the consumer only and not to members of the cartel. Understanding the utility-maximizing combination of the consumer is incentive enough for a firm to want to join a cartel.

Firm have an incentive to behave cooperatively rather than competitively when reducing output below the competitive level generates an economic profit. All cartel members can share this profit.

In the long run, an oligopoly firm will operate at zero economic profit; forming a cartel will allow all members to share in that profit.

A firm has no incentive to form a cartel if the price it charges for the output produced is less than its marginal cost.

Explanation / Answer

Option B is correct. Firms have an incentive to behave cooperatively abd reduce outout to increase profits which is shared.

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