Which of the Following Explains Why Two Firms, Apex and Bongo

question 33

Multiple Choice

Which of the following explains why two firms, Apex and Bongo, would engage in implicit collusion, rather than explicit collusion?

• A)Implicit collusion allows Apex to increase its profits at the expense of Bongo without Bongo knowing that collusion has occurred; if Apex engages in explicit collusion, Bongo will realize collusion has taken place and retaliate against Apex.
• B)Implicit collusion is less costly to both firms than explicit collusion; therefore, profits will be greater for both firms if they engage in implicit collusion.
• C)Explicit collusion is illegal; if the managers of Apex and Bongo engage in implicit collusion they may be within the law.
• D)Implicit collusion always has an enforcement mechanism that forces both firms to collude; explicit collusion does not have an enforcement mechanism.

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Definitions:

Agreement

A mutual understanding or arrangement between two or more parties that typically involves an exchange of goods, services, money, or promises.

Officer

An individual holding a position of command, authority, or responsibility within an organization, especially in a military, corporation, or governmental context.

Ordinary Business Transactions

Everyday activities and operations that are necessary for the running and maintenance of a business.

Formal

Following or adhering to established rules, conventions, or procedures.