Which of the Following Explains Why Two Firms, Apex and Bongo

question 33

Multiple Choice

Which of the following explains why two firms, Apex and Bongo, would engage in implicit collusion, rather than explicit collusion?

• A)Implicit collusion allows Apex to increase its profits at the expense of Bongo without Bongo knowing that collusion has occurred; if Apex engages in explicit collusion, Bongo will realize collusion has taken place and retaliate against Apex.
• B)Implicit collusion is less costly to both firms than explicit collusion; therefore, profits will be greater for both firms if they engage in implicit collusion.
• C)Explicit collusion is illegal; if the managers of Apex and Bongo engage in implicit collusion they may be within the law.
• D)Implicit collusion always has an enforcement mechanism that forces both firms to collude; explicit collusion does not have an enforcement mechanism.

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Definitions:

Cost Of Capital

The minimum rate of return that a business must earn before generating value, representing the opportunity cost of investing resources in a specific company instead of elsewhere.

Cash Flow

The aggregate amount of cash and similar liquid assets flowing into and away from a business entity.

Labor Force Participation Rates

A measure of the active portion of an economy's labor force, indicating the percentage of people who are either working or actively looking for work.

United States

A country in North America, known for its significant influence in economic, political, and cultural matters globally.