Suppose That Three Oligopolistic Firms Are Currently Charging $12 for Their

question 52

Multiple Choice

Suppose that three oligopolistic firms are currently charging $12 for their product. The three firms are about the same size. Firm A decides to raise its price to $18, and announces to the press that it is doing so because higher prices are needed to restore economic vitality to the industry. Firms B and C go along with Firm A and raise their prices as well. This is an example of:

• A) price leadership.
• B) collusion.
• C) the dominant firm model.
• D) the Stackelberg model.
• E) none of the above

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Definitions:

Manufacturer

A person or company that makes goods for sale, especially on a large scale.

Damages

Financial compensation awarded to a party in a lawsuit for loss or injury suffered due to another party's actions or negligence.

Bottle of Pop

A colloquial term referring to a sealed container filled with a carbonated soft drink.

Installment Plan

A payment method allowing a purchaser to pay for goods or services over a period of time in regular, fixed amounts.