In which situation does overt collusion take place?
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 refers to when firms in an industry agree openly on price and output, and they jointly make other decisions aimed at achieving monopoly profits. It is a clear and explicit agreement among firms to coordinate their behaviors in order to reduce or eliminate competition. Choice A describes tacit collusion, where firms have an unspoken agreement to charge the same price as the largest firm. Choices C and D describe competitive markets, where firms do not collude with each other.

In Which Situation Does Overt Collusion Take Place