CAIE A-Level Economics 7.7.4 Cartels

Practise identifying price-fixing or quota agreements, explaining conditions for cartel stability and using cost-revenue evidence to analyse cheating, price, output and profit.

Exam points

identify a cartel from coordinated prices, market sharing, output restriction or quotas
explain effectiveness through few firms, high entry barriers, stable demand and enforceable quotas
use MC and cartel price to calculate the output and extra profit gained by cheating

[Maximum number: 1]

What is likely to prevent the development of an effective cartel in an industry?

a high concentration ratio

a limit-pricing policy

high fixed costs

low barriers to entry

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7.7.4—Cartels question 1