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.