Collusion results when a group of firms i. act separately to limit output, lower prices, and decrease economic profits.
Ii. act together to limit output, raise prices, and increase economic profits.
Iii. in the United States legally fix prices.

Question

Quizplus · Accepted Answer

Collusion is an agreement among firms to limit output, raise prices, and increase profits. Therefore, option ii is the correct choice. Option i is incorrect because it mentioned that firms act separately, whereas collusion happens when firms act together. Option iii is also incorrect because fixing prices legally is prohibited under U.S antitrust laws.

Collusion Results When a Group of Firms I