Question

What is one reason why the government discourages collusion between large firms in the industry?:

a) To encourage price competition
b) To prevent anticompetitive behavior
c) To promote economies of scale
d) To increase industry profits

Answer 1

The government discourages collusion between large firms in the industry to prevent anticompetitive behavior.

Step-by-step explanation:

One reason why the government discourages collusion between large firms in the industry is to prevent anticompetitive behavior. Collusion allows firms to reduce output and keep prices high, leading to higher profits for the colluding firms while harming consumers. By preventing collusion, the government aims to protect the principles of a competitive market where prices are determined by market forces and not by colluding firms. For example, when oligopolistic firms act together to charge higher prices, it reduces consumer choice and can lead to market inefficiencies.