Question

Successful cartels raise the​ participants' profit.​ Why, then, do nations have laws making cartels​ illegal?

​(Check

all that

apply.​)

A.

Higher prices transfer surplus from consumers to cartel members and create a competitive return for the cartel.

B.

Higher prices transfer surplus from consumers to cartel members and create a deadweight loss for the society.

C.

Consumers and society are both worse off from the presence of cartels.

D.

Consumers are better off but the society is worse off from the presence of cartels.

Answer 1

Correct Answer:

B

C

Presence of cartel makes consumers to create less demand and at a higher price. It creates dead weight loss. So, there is a loss to the consumers and society due to the cartel in operation.