Tacit collusion is more likely to occur when firms' costs________ closely related and their products close________ substitutes.

Question

Quizplus · Accepted Answer

Tacit collusion is more likely to occur when firms' costs are similar and their products are close substitutes. When firms have similar costs, they are more likely to reach a mutually beneficial agreement on pricing or output levels. When their products are close substitutes, they are more likely to respond to each other's actions in the market, leading to a coordinated outcome. Therefore, the best option is D, where both conditions are met.

Tacit Collusion Is More Likely to Occur When Firms' Costs________