The presence of a relatively large number of firms in an industry does not ensure perfect competition if:
A)they sell products that are standardized.
B)there are also a large number of consumers.
C)they collude to set prices in the market.
D)the industry is an increasing-cost industry.

Question

Quizplus · Accepted Answer

When firms collude to set prices in the market, they are no longer competing with each other and instead are working together to maintain high prices and restrict output. This behavior is known as an oligopoly and is a form of market failure. Therefore, the presence of a large number of firms in an industry does not ensure perfect competition if they collude to set prices.

The Presence of a Relatively Large Number of Firms in an Industry