Collusion among firms to raise prices is rare in monopolistically competitive markets because _____

Question

Quizplus · Accepted Answer

In monopolistically competitive markets, there are typically many firms producing differentiated products, which leads to a high degree of market competition. This makes it difficult for firms to collude and raise prices collectively without the risk of losing customers to their competitors. Therefore, collusion among firms is rare in monopolistically competitive markets.

Collusion Among Firms to Raise Prices Is Rare in Monopolistically