Final answer:
A consortium is the correct term for an association like the one formed by Prudential and other large insurance companies when underwriting a large policy, which is a cooperative effort rather than a cartel designed to monopolize and fix prices.
Step-by-step explanation:
When Prudential and several other large insurance companies join together to underwrite an extremely large insurance policy, the sort of association formed is referred to as a Consortium (Option C). This collaboration is not formed with the intent to monopolize the market or to set prices and reduce output as a cartel would do. Instead, a consortium typically exists to pool resources for a particularly large or complex project that would be difficult or impossible for one firm to handle alone. The reasons why corporations may join together in an association include strength in numbers, addressing common issues that affect an entire industry, and benefiting from governmental policies (“all of the above”).
Firms in an oligopoly market situation, where a few firms dominate the market, may be tempted to collude to act as a monopoly. However, such explicit collusion is illegal, and these alliances often break down due to individual incentives to increase output. Therefore, while oligopolists can potentially earn the highest profits by acting as a cartel, a consortium is a cooperative arrangement that does not seek to fix prices or limit the market in the same manner as a cartel.