Figure: Collusion (Figure: Collusion) In the figure Collusion, panel (c) gives the combined marginal revenue, demand, and marginal cost curves for an industry containing several firms.Panels (a) and (b) give marginal cost curves for two of those firms.The price charged by the industry with collusion is shown by:
A)W.
B)X.
C)Y.
D)Z.

Question

Quizplus · Accepted Answer

The price charged by the industry with collusion is shown by W. This is because collusion is an agreement between firms to act together in order to maximize their profits. By colluding, the firms can restrict output and raise prices above the competitive level. The price charged by the industry with collusion will be the price that maximizes the industry's profits, which is the price that equates the industry's marginal revenue to its marginal cost. In the figure, the industry's marginal revenue curve is given by MR, and the industry's marginal cost curve is given by MC. The price that equates MR to MC is W.

Figure: Collusion (Figure: Collusion) in the Figure Collusion, Panel (C)