The best collusive outcome occurs when the sum of the firms' output is:
A)a Nash equilibrium.
B)equal to the competitive outcome.
C)equally divided among the firms.
D)equal to the monopoly outcome.

Question

Quizplus · Accepted Answer

The best collusive outcome occurs when the firms collectively produce the same quantity of output as a monopolist would. This produces the highest possible profits for the firms and is known as the monopoly outcome. Choice A is incorrect because a Nash equilibrium does not necessarily lead to the best outcome for the firms. Choice B is incorrect because the competitive outcome is not collusive and does not involve cooperation among the firms. Choice C is incorrect because dividing output equally among firms may not result in the highest profits for each firm.

The Best Collusive Outcome Occurs When the Sum of the Firms