CSEET · Economic and Business Environment · Basics of Demand and Supply and Forms of Market Competition
A cartel is best described as:
A cartel is a formal agreement among oligopolistic firms to fix prices or restrict output so that together they behave like a monopolist and earn higher joint profits. It differs from monopsony, product differentiation and free-entry markets.
- AAn agreement among oligopolistic firms to fix price or output and act like a monopolyCorrect
- BA market with one buyer and many sellers
- CA firm that sells differentiated products through advertising
- DA market where firms freely enter and exit
Explanation
A cartel is a formal collusive arrangement among oligopolists to restrict output or fix prices so as to raise joint profit. One buyer describes monopsony, and differentiation through advertising describes monopolistic competition. Free entry and exit is a feature of competitive markets.
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