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If a group of sellers could form a cartel, what market structure would that be? Explain....

If a group of sellers could form a cartel, what market structure would that be? Explain. Based on the actions of the cartel members, what quantity and price do you think they would try to set? Provide specific examples to support your examples.

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Answer #1

If a group of sellers form a cartel, we can term it as a monopolistic market structure since all the members of this cartel would influence the price/demand of product/services available in the market.

Normally in this market structure the cartel would try to set higher prices since the consumers won't have the bargaining power to choose from whom to buy and at what price. The power parity is more towards the seller/cartel.

Suppose, in a market three sellers (selling mangoes) forms a cartel and they are the only three sellers in the market selling mangoes. They would always attempt to keep the prices at elevated levels since they know there are no substitutes for their mangoes. As a results consumer have to buy the mangoes at the set price rather than having the bargaining power to choose the price.

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