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Suppose that there is a cartel of 3 firms in the industry along with a competitive fringe firm which is a price taker. Discuss and

Suppose that there is a cartel of 3 firms in the industry along with a competitive fringe firm which is a price taker. Discuss and explain whether it gets easier or harder to sustain the cartel under each case below:

a. an increase in the demand elasticity at the market level.

b. entry by a large firm that remains outside the cartel.

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