Collusion is undesirable and illegal because
A)Government intervention leads to inefficient outcomes.
B)It leads to greater production than would occur in a competitive market.
C)It is unprofitable and the government must bail out firms that are bankrupted by collusion.
D)Resources are misallocated and the level of output is restricted.

Question

Quizplus · Accepted Answer

Collusion leads to resources being misallocated as firms work together to restrict output and keep prices artificially high. This results in less efficient outcomes and less overall production. It also limits consumer choice and can harm small businesses. Therefore, collusion is illegal to prevent these negative economic effects. A, B, and C are incorrect because they do not accurately describe the consequences of collusion.

Collusion Is Undesirable and Illegal Because