True or False: Based on the fact that both Gregor and Haidy increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity. True False

True! When both Gregor and Haidy increase production, it suggests that the additional revenue generated by producing more (output effect) outweighs the decrease in price due to increased supply (price effect). This could indicate that their combined production growth leads to greater profits, demonstrating that the output effects can indeed dominate under certain cartel circumstances. In a typical cartel scenario, members aim to maximize joint profits by restricting output to raise prices. However, individual incentives can lead to overproduction. If all members begin to cheat the agreement, it often results in a scenario where the total market supply increases, and thus the price drops, potentially harming long-term profitability. Finding the right balance is key!