But is that better for the business even though it means taking a hit on their profit margin?
If making more money is better, then sure it is.
But what is the benefit of making more money if it does not result in a higher profit margin?
I hope you’re serious. Assume it costs you $40 to make a pair of shoes and you have the capacity to make hundreds of them a month. Which of these two monthly scenarios would you prefer:
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Sell 1 pair for $100 resulting in a $60 profit and a 60% profit margin, or
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Sell 100 pairs for for $50 resulting in a $1,000 profit and a 20% profit margin ?
Hint: It’s the profit (money made) that buys your dinner, not profit margin.
But it’s not that simple, is it? After all, the second scenario means more work, which is a disadvantage to the second scenario. Though you are making more total profit, does it outweigh the increased cost? Furthermore, what if you need to hire more people to make those 100 shoes? Is it still worth it since the profit to me personally may not be higher?
Listen, bud. If more work (more business, higher profits) are somehow problematic for you, then don’t start a business and just work for a paycheck which is all profit and no expenses (i.e. 100% profit margin). Or, even better, just sit on your butt in your mother’s basement and profit from the free dinners she throws at you, achieving a 100% margin without having to do any work.
I lol’d, srsly 
Listen, bud. If more work (more business, higher profits) are somehow problematic for you, then don’t start a business and just work for a paycheck which is all profit and no expenses (i.e. 100% profit margin). Or, even better, just sit on your butt in your mother’s basement and profit from the free dinners she throws at you, achieving a 100% margin without having to doany work.
No, first of all, you need to calm down. I was raising the question of subjective value, because even though I am making more money in total, the dissatsifaction associated may make the whole scenario not be worth it. In other words, if I can work for 10 hours and make $100, or work 20 hours and make $200, the first scenario may be worthwhile to me while the second may not be. Sorry to bring subjective value into the equation, but this is nothing radical that I’m brining up. This is something the Austrian school readily accept as a valid scenario. Instead you sensationalized it and made it about work ethic. It’s a serious economic question and if you can’t answer it for me then lay off. I just had a simple question. I wasn’t trying to prove anything, I just wanted a question answered. So excuse me for thinking up counterarguments.This school of economics doesn’t teach you to be dismissive of a discussion of economics, so where’s this unnecessary hostility coming from?
Profit margin is a useful measure to determine how many of something needs to be sold. If the main concern or measurement of succes were profit margin, grocery stores would not exist, as they run with 1% to 5% (mostly 1%, sometimes even less). Yes it takes more work, but economies of scale also kick in. In this case, it is the product turn over time that makes it worthwhile. If return on investment is 1 cent for one dollar invested, it is very accaptable if I can do this so many times a year that it becomes a better return than if I use the money in a different investment. The shoe example above is good, as that is the crust of the reason for “lower profit margins”. The thing to keep in mind about profit margins is that they are not timed, and time is crucial for total returns. In the grocery example, a one percent profit margin on a can of soup that is turned over 365 times a year yields a very good return indeed. You say that it takes more work to sell more (for more total profit, and a lower “profit margin”), but that IS reflected in the profit margin!
So, while profit margin can be useful in the calculation of units needed to be sold per certain time frame (so is not a measure of performance), using total returns per dollar spent is a better measure of performance. I sugest return on capital (equity plus debt) as a measure of succes, ignoring profit margin from uses other than as a guideline for production and to help determine if the product or service will be worthwhile.
Why do you care if the businesses stay in the cartel or not?
If all of the businesses inside the cartel prefer higher margins to higher profits, then they restrict their market share. Outside firms will arise to compete, seeking some of the high profits in the cartel. The cartel must then lower prices. If the market takes a long time to enter, then it will take a long time for competition to spring up. But so what? The cartel can’t make people buy their overpriced crap.
Anti-trust legislation boils down to this: “Someone out there is doing something I don’t like! Quick, get the guns!” The price of freedom for all is that other people get to do stuff you don’t necessarily agree with, and you don’t get to arrest/imprison/shoot them for it. If you can’t handle that, then anti-trust legislation probably makes sense for you.
Note: That’s a general “you”. I’m not attacking your opinion on anti-trust, since I don’t know it. I get the feeling you are looking to defend against the arguments you are posting.
In that case, why don’t they raise their margins to infinity and beyond? Also, there is potential competition that could come in and undercut everyone in the trust, forcing the trustees to drop out of the trust.
Just as in the video linked above, Rothbard covers this very concept in this lecture…and then shows how it fit into the formation of the Fed.
