Two Firms Would Sometimes Be Better Off If They Got

question 20

Multiple Choice

Two firms would sometimes be better off if they got together and agreed to charge a high price, rather than to compete and risk having to charge a lower, competitive price.What is the greatest deterrent to this strategy?

• A)The firms may find that the price they charge is greater than the price that would maximize their profits.
• B)An agreement by firms to charge high prices is illegal. The government can fine the firms and send their managers to jail.
• C)Consumers may resent having to pay high prices and not buy from either of the firms.
• D)One of the firms may decide to lower its price and take business away from the firm that charged the high price.

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Definitions:

Condensation Polymer

A type of polymer formed by the condensation reaction between monomers, releasing a small molecule such as water when they react.

Poly(Ethylene Terephthalate)

A thermoplastic polymer used in fibers for clothing, containers for liquids and foods, and in thermoforming for manufacturing.

Orlon

A synthetic fiber made from a polymer acrylonitrile, used primarily in textiles.

Poly(Acrylonitrile)

A polymer made from acrylonitrile monomers, commonly used in the production of synthetic fibers and plastics.