If the only two firms in an industry agree to fix the price at a given level, this is an example of:
A) collusion.
B) satisfying.
C) price extortion.
D) price leadership.

Question

Quizplus · Accepted Answer

Collusion occurs when two or more firms agree to coordinate their pricing or other business practices in order to achieve higher profits. In this scenario, the two firms are fixing the price at a certain level, which is an example of collusion. Satisfying and price extortion do not accurately describe this situation, while price leadership occurs when one firm in the industry sets the price and the other firms follow it.

If the Only Two Firms in an Industry Agree to Fix