Question

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

a. two large companies that dominate the soft-drink industry agree with each other to raise their prices.
b. all the ski resorts in a colorado town raise their prices for the winter and lower their prices for the summer.
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. all the hotels in town increase their prices when a major sporting event is played there.

Answer 1

The correct answer is option a and e. Collusion occurs when firms collaborate to manipulate prices and profits. In the given options, examples of collusion are two large companies in the soft-drink industry agreeing to raise prices and all hotels in a town increasing prices during a major sporting event.

Step-by-step explanation:

Collusion occurs when firms in an oligopoly market act together to reduce output and keep prices high. The examples of collusion from the given options are:

1. a. Two large companies that dominate the soft-drink industry agree with each other to raise their prices.
2. e. All the hotels in town increase their prices when a major sporting event is played there.

These two examples represent situations where firms cooperate to manipulate prices and profits, which is the essence of collusion.