|Posted on April 16, 2014 at 8:25 PM|
The subject of cartel formation arises when talking about an oligopolistic (a few powerful firms) market structure. If these firms collude and coordinate all business decisions, then a cartel is formed. The cartel acts like a monopoly as it controls the price and output in the industry. It's highly inefficient, the consumers lose, and the cartel's profits rise. OPEC is a cartel.
AP Microeconomics Unit 2 Product Markets