Author Question: Cartels are difficult to maintain because: a. there are generally few barriers to entry in ... (Read 60 times)

dalyningkenk · **on:** Jun 30, 2018

Cartels are difficult to maintain because:
a. there are generally few barriers to entry in oligopoly markets.
b. firms have a strong private incentive to cheat on agreements.
c. it is difficult to enforce a cartel agreement.
d. both (b) and (c).

Question 2

Suppose in the market for used cars, buyers would be willing to pay 9,000 for a car in good condition, while buyers would have to incur a cost of 3,500 to repair a car in poor condition. Assume a risk-averse buyer is aware that some of the cars are lemons, but is uninformed about the probability of a car being in good condition or otherwise. What price would this buyer, seeking only to minimize risk, be willing to pay for a car?
a. 3,925
b. 5,500
c. 7,775
d. 5,850