In which of the following situations does overt collusion exist?
A)Smaller firms in an industry have an unspoken agreement to charge the same price as the largest firm.
B)Firms in an industry agree openly on price and output, and they jointly make other decisions aimed at achieving monopoly profits.
C)Competition among a large number of small firms generates similar but slightly different prices.
D)Competition among a large number of small firms generates a stable market price.

Question

Quizplus · Accepted Answer

Overt collusion involves an open agreement among firms to set prices and output levels aimed at achieving monopoly profits. This is exactly what happens in option B. The other options deal with either unspoken agreements or competition among small firms, which do not involve overt collusion.

In Which of the Following Situations Does Overt Collusion Exist