Question

sometimes duopolists try to cooperate with one another. match the economic phenomenon to the description that most accurately describes it. a) collusion antitrust laws cartel two cable companies are forced to cease working together to set prices in their market. b) press space to open four international electronics manufacturers group together to limit the amount of computers available on the market. c) press space to open two internet companies come to an agreement to charge the same amount for their services.

Answer 1

Oligopoly firms may collude to act like a monopoly by limiting output and setting high prices, forming cartels. Antitrust laws exist to prevent such anti-competitive behavior and maintain market competition.

Step-by-step explanation:

When firms in an oligopoly market decide on the quantity to produce and the pricing, they sometimes engage in a behavior known as collusion, where they cooperate to limit output and maintain high prices to share monopoly-like profits among them. This cooperation often takes the form of a cartel, a group of firms that formally agree to collude. However, such activities are typically illegal in many parts of the world, as they reduce competition and limit consumer choices. Hence, antitrust laws are enforced to prevent such practices, promoting competition and protecting consumers.

For instance, when two cable companies are forced to stop collaborating on price setting, it is a result of antitrust laws intervening to break up their collusion. If four international electronics manufacturers group together to limit the supply of computers, it is an example of a cartel. Similarly, when two internet companies agree to set identical service charges, they engage in collusion, which is against competitive market practices.

Answer 2

Collusion is when two or more firms in a duopoly work together to control the market. A cartel is a formal agreement between firms to coordinate market control, while antitrust laws prevent these practices to ensure competition remains fair.

Step-by-step explanation:

In the context of a duopoly, collusion occurs when two firms agree to work together to control the market by setting high prices and limiting production, simulating monopoly-like conditions. A more structured form of collusion is called a cartel, where firms have a formal agreement to coordinate their prices and outputs.

On the other hand, antitrust laws are regulations that prevent such collusion and promote competition. These laws can force companies to stop such anti-competitive practices, which can include actions like price-fixing, market division, and tying up sales to maintain fair play in the market.

Based on the scenarios provided:
(a) 'Two cable companies are forced to cease working together to set prices in their market.' matches with 'antitrust laws'.
(b) 'Four international electronics manufacturers group together to limit the amount of computers available on the market.' would be an example of a 'cartel'.
(c) 'Two internet companies come to an agreement to charge the same amount for their services.' is an instance of 'collusion'.