Question

Which of the following are examples of collusion?

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.Three major airlines meet to discuss pricing strategy and as a result prices for airplane tickets rise.

C.The two firms in a small rural town that employ most of the people in that area agree to keep wages low.

D.Two steel manufacturers apply the same new technology, which increases productivity for both.

E.All the seafood restaurants in a coastal town increase their prices after a bad storm reduces the amount of fish being caught locally.

Answer 1

The answer is option B) Three major airlines meet to discuss pricing strategy and as a result prices for airplane tickets rise.

Step-by-step explanation:

Collusion is a non-competitive, secret, and sometimes illegal agreement between rivals which attempts to disrupt the market's equilibrium.

The act of collusion involves people or companies which would typically compete against one another, but who conspire to work together to gain an unfair market advantage.

Major airlines are usually competing among each other to get more patronage. Some may use cheaper fares to their advantage but Collusion takes place when they meet and agree to increase prices of air fare on all fronts.