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Formation of a cartel in an industry will decrease competiton between producers and hurt consumers. True...

Formation of a cartel in an industry will decrease competiton between producers and hurt consumers.
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Answer #1

Formation of a cartel in an industry will decrease competiton between producers and hurt consumers. This statement is true. When producers form a group and work together in order to protect their interests, it is known as cartel. In this, a few large producers cooperate with each other with respect to price and market share. The members of the cartel can fix prices for the group so that price competition is removed. All the members can set high prices together and this will reduce the price elasticity of demand of the member firms. The consumers will be left with no choice but to buy the product at high price only.

Thus formation of a cartel in an industry will decrease competition between producers and hurt consumers.

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