Answer to Question #147690 in Microeconomics for justincase

Question

The competition commission of india had imposed a penalty of more than Rs 60 billion on cement firms in 2012.
Justify the same based on following point
a) how do you think the cartel would affect the price & quantity? Can prices diverge significantly from marginal cost in cement industry, and why?
b) How do you think the cartel formation helps producers?
c) how do you think the cartel impacts the consumers?
d) how does the cartel affect overall welfare of the society and why?

Answer 1

a) The prices of cement would therefore increase and as result the cement firms would reduce there productivity and there quantity will decrease.

b)The cartel formation is useful in taking the cement to the consumer convenience

c)The cartels help the consumer access the good of their choice.

d)The cartel are there to regulate both the prices and quantity of cement in the society