Question

25. Cartel formation is most likely to happen
under
monopoly

oligopoly
perfect competition
monopolistic competition
​

Answer 1

Answer:

A cartel is defined as a group of firms that gets together to make output and price decisions. The conditions that give rise to an oligopolistic market are also conducive to the formation of a cartel; in particular, cartels tend to arise in markets where there are few firms and each firm has a significant share of the market. In the U.S., cartels are illegal; however, internationally, there are no restrictions on cartel formation. The organization of petroleum‐exporting countries (OPEC) is perhaps the best‐known example of an international cartel; OPEC members meet regularly to decide how much oil each member of the cartel will be allowed to produce.

Answer 2

Answer:

Cartel formation is most likely to happen under oligopoly.

A cartel is an association of independent businesses or individuals with the aim of monopolizing or restricting the production or sale of a particular good.

• In oligopoly markets, a limited number of suppliers control the market, giving rise to a cartel.
• The most typical agreements work to control output, market share, and prices. Even though they follow similar policies, cartel members keep their own identities and financial independence.

• Exploiting the monopoly position is in the shared interest of all cartel members. they are the sole owners of a good and hence, have full authority over the price regulation of that good.
• so, When rival businesses in a given sector conspire to make formal, explicit agreements to fix pricing and output levels, this is known as a cartel.
• 13 of the largest oil-exporting countries in the world are together referred to as the Organization of the Petroleum Exporting Countries (OPEC). OPEC works to control oil supply and stabilise oil prices on the global market to prevent fluctuations that could harm the economy of both oil-producing and consuming nations.

Although a cartel can theoretically emerge in any industry, it can only actually do so in an oligopoly with a small number of businesses.

So, Cartel formation is most likely to happen under oligopoly.

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