Question

Monopolies can produce goods at a lower cost than cartels.

true or false

Answer 1

The statement is not correct. Monopoly have no incentive to reduce their cost of production because they face no competition. A cartel on the other side will simply at all the marginal cost of different members to arrive at the aggregate marginal cost. Because different firms have different ability to produce their marginal cost also vary and this reduces the aggregate marginal cost comparative to a monopoly. Moreover each member has an incentive to reduce its cost so that it can produce more and earn a higher profit.