Two Firms Would Sometimes Be Better Off If They Got

question 20

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 maximize 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:

Hypertrophy

Increase in bulk or size; not due to an increase in number of individual elements.

Genitalia

The external and internal organs of reproduction and their associated structures.

Prostate Gland

A gland in the male reproductive system that produces a fluid which helps to nourish and transport sperm.

Bulbourethral Glands

Small glands located near the base of the penis, involved in secreting a fluid that lubricates and neutralizes acidity during sexual arousal.