There are four ice cream shops on a small tourist island.The accompanying table shows the quantity of ice cream cones that each firm produces in a typical year and the price that each firm currently charges for each ice cream cone it sells.An economist might suspect __________ collusion occurring in this market where __________ is the price leader and all other firms set price to match the price leader.

Question

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The economist might suspect tacit collusion occurring in this market where Vanilla Emporium is the price leader and all other firms set price to match the price leader. This is because all firms are charging the same price of $4.00 per cone, despite differing levels of production. This suggests that they may be communicating or coordinating informally to maintain a higher price and avoid price competition. It is not explicitly stated that they are engaging in illegal or explicit collusion.

There Are Four Ice Cream Shops on a Small Tourist