Question

A. The menu prices at restaurants in New Buffalo, Michigan, a small lakeside town, increase during the summer months and decline starting November 1. B. All the gas stations along the Gulf coast increase their prices after a hurricane devastates communities near the water. C. Two steel manufacturers apply the same new technology, which increases productivity for both. D. The two firms in a small rural town that employ most of the people in that area agree to keep wages low. E. Three major airlines meet to discuss pricing strategy and as a result prices for airplane tickets rise.

Answer 1

Which of the following are examples of collusion? Choose one or more:

Step-by-step explanation:

Answer: C, and E

Collusion is the process in which few firms (but not all firms) in the industry mutually cooperate (through a secret meeting) for their own benefits (but not for the benefits of whole industry).

Option A: This is not collusion, since all the owners are involved.

Option B: This is not collusion, since increasing productivity is the normal process.

Option C: This is collusion, since the labor market is deceived by only 2 firms.

Option D: This is not collusion, since all the gas stations are involved.

Option E: This is collusion, since only dominating firms deceive the industry by increasing prices.