Multiple choice

Which of the following statements is incorrect about market-sharing cartels?

  1. Two firms enter into a market-sharing agreement on the basis of the quota system.

  2. Each firm produces and sells a heterogeneous product which is not a perfect substitute for each other.

  3. There are large number of buyers.

  4. Each firm has its own demand curve having the same elasticity as that of the market demand curve.

  5. Cost curves of the two firms are identical.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

This point is not true because according to the assumption of market-sharing cartel, each firm produces and sells a homogeneous product.

Keep practicing — related questions