If Firms Make Agreements That Reduce the Amount of Competition

question 49

Multiple Choice

If firms make agreements that reduce the amount of competition in a market,

• A)the market price usually falls
• B)they would face penalties under antitrust legislation
• C)mergers will result
• D)there must be diseconomies of scale in the industry
• E)they would face penalties under contract law

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Definitions:

Marginal Revenue Curve

The marginal revenue curve represents the change in total revenue that results from selling one more unit of a product.

Crude Oil Production

The process of extracting oil from underground reservoirs and preparing it for refining into usable products such as gasoline, diesel, and other petrochemicals.

Effective Collusion

coordination between competing firms to control prices or market shares in a way that benefits the entities involved, often at the expense of fair market competition.

Oligopolistic Collusion

When a few firms in an oligopoly market secretly agree to fix prices, limit production, or divide markets among themselves to reduce competition and increase profits.