Firms engage in explicit collusion when
A) They predict what the other will do and attempt to undercut them
B) They collude without communicating, sustaining a price above the noncooperative price that would arise in a single competitive interaction
C) They communicate to reach an agreement about the prices they will charge
D) They communicate what type of good they will produce

Question

Quizplus · Accepted Answer

Explicit collusion requires communication between firms to reach an agreement about the prices they will charge. Option A is an example of tacit collusion, where firms cooperate without explicit agreement. Option B is not collusion as firms are not communicating or working together to sustain higher prices. Option D is incorrect as communication about the type of good does not necessarily indicate collusion.

Firms Engage in Explicit Collusion When