Read each question and choose the best answer.

Question

If the three largest producers of breakfast cereal agreed to form an organization that produced a limited amount of cereal for the next year in order to inflate the price, what would they be doing?
A. creating an oligopoly
B. creating a price war
C. creating a cartel
D. creating a monopoly

Answer 1

The correct answer is: C. creating a cartel.

A cartel is an agreement between competing firms to limit production, increase prices, or collaborate in other ways to maximize their profits. In this scenario, the three largest producers of breakfast cereal are coordinating their output to inflate prices, which is characteristic of a cartel.