What is a cartel in economics?
Q: What is a cartel in economics?
A: A cartel is a group of formerly independent companies that agree to work together to increase their profits or stabilize market sales.
Q: How do cartels increase their profits?
A: Cartels increase their profits by fixing the price of goods, limiting market supply, or by other means.
Q: How are monopolies different from cartels?
A: Monopolies are different from cartels because there is only one independent company in a monopoly.
Q: Why are cartels bad for the economy and their customers?
A: Cartels are bad for the economy and their customers because they overcharge customers.
Q: Where do cartels usually occur?
A: Cartels usually occur in oligopolies where there are a small number of players that control the majority of supply in a market.
Q: Are buyers capable of forming cartels as well?
A: Yes, buyers may also form cartels to suppress the price of a purchased input.
Q: What is bid rigging?
A: Bid rigging is when potential suppliers form an agreement as to which of them will win a supply contract at a price above the competitive price and agree to a rule for sharing the extra profits among themselves.
