Two Firms Would Sometimes Be Better Off If They Got

question 62

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 maximise 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:

Red Herring Fallacy

A response is directed toward a conclusion that is different from that proposed by the original argument.

Irrelevant Information

Data or facts that do not pertain to or have no bearing on the current topic, question, or issue at hand.

Large Fish

Typically refers to fish species that grow significantly larger than others, often sought after by fishermen and considered important in marine ecosystems.

Informal Fallacy

A type of mistaken reasoning that occurs when an argument is psychologically or emotionally persuasive but logically incorrect.