The Diagram Below Shows the Demand and Supply Curves in a Perfectly

question 121

Multiple Choice

The diagram below shows the demand and supply curves in a perfectly competitive market.
FIGURE 12-5
-Refer to Figure 12-5. If output in this market were Q3, and the price were still P2, the loss in consumer surplus relative to the competitive equilibrium would be illustrated by area

• A) 1.
• B) 2.
• C) 3.
• D) 4.
• E) 3 + 4.

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Definitions:

Tacit Collusion

A form of collusion among competing firms in an industry to raise prices or slow production informally without a direct agreement.

Price Leadership

A pricing strategy where a dominant firm in the market sets the price of goods or services, and other competitors follow.

Tacit Collusion

An unofficial agreement among competitors to limit competition and keep prices high, without explicit communication or legal contracts.

Price Leadership

A strategy where the leading firm in a market sets the price of goods or services, and other firms in the market follow suit.