Suppose Two Firms in a Duopoly Implicitly Collude and Charge

question 74

Multiple Choice

Suppose two firms in a duopoly implicitly collude and charge a high price.How might each firm benefit from advertising that it will match the lowest price offered by its competitor?

• A)The offer to match prices is a way of deterring entry by other large firms, thereby keeping the market share of the existing firms intact.
• B)The advertisement ensures that the other firm does not cheat. If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same.
• C)The offer to match prices is a way of signaling to antitrust authorities that the firms are not engaged in illegal collusion.
• D)The advertisement is meant to suggest to consumers that the offered price is actually the lowest price available.

---

Definitions:

App Store

An Apple tool that enables a user to shop for various applications to download on a device.

Software Store

A software store is a digital marketplace where users can purchase, download, and manage software applications for various platforms.

Menu Bar

A component of the macOS GUI that is anchored to the top of a screen and is a dynamically changing bar that presents contextual drop-down menu options on the left side, depending on which window is active. On the right side, it provides shortcuts such as connecting to a WiFi network or changing volume. It is also informative, displaying information such as battery life on laptops and the time.

Force Quit

The macOS feature used to stop a program when it stops responding or working correctly.