1.2. Firms in a cartel each have an incentive individually to lower the prices they charge.

a. Suppose there was a government regula tion that set minimum prices. Would this regulation tend to strengthen cartels, weaken them, or have no effect?

b. Another way that one firm can cheat on a cartel is to offer a higher-quality product to consumers. Suppose there was a government regulation that standardized the quality of a good. Would this regulation tend to strengthen cartels, weaken them, or have no effect?