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 demand.
C)price extortion.
D)price leadership.

Question

Quizplus · Accepted Answer

Collusion is an agreement between firms to restrict output or fix prices, with the aim of reducing competition and increasing profits. In this case, the two firms are agreeing to fix the price at a given level, which is an example of collusion. Satisfying demand, price extortion, and price leadership are not applicable in this scenario.

If the Only Two Firms in an Industry Agree to Fix