Which of the Following Is NOT a Reason Why Collusion

question 30

Multiple Choice

Which of the following is NOT a reason why collusion may be hard to sustain?

• A) Firms observe their rivals' prices only imperfectly.
• B) Marginal costs, and therefore agreed-upon prices, may differ among firms or products.
• C) Prices wars in practice may not conform to the predictions of the Bertrand model.
• D) The potential profits from collusion can be so high as to create an incentive not to undercut.

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Definitions:

Revenue Variance

The difference between the actual revenue for the period and how much the revenue should have been, given the actual level of activity. A favorable (unfavorable) revenue variance occurs because the revenue is higher (lower) than expected, given the actual level of activity for the period.

Sales Revenue

The income received from selling goods or services over a period of time.

Actual Level

The real, observed or measured value of a variable or condition, as opposed to an estimated or theoretical level.

Flexible Budget

A dynamic budget that changes according to the business activity levels, offering a more adaptable financial planning tool.