The diagram illustrates a firm’s marginal cost and average cost curves. This firm then joins a collusive arrangement with other firms in the industry. Under the agreement, every firm is to set the same price, OP, and keep its output at a production quota fixed by the industry cartel. The firm is assigned a quota of Oq. It chooses to cheat so as to maximise its profits. What is the resulting short-run rise in profits?
- APGKL
- BPHJL
- CPHJL minus PGNM
- DPGKL minus LKNM