Question

If United Airlines acted as a "price leader" and all other airlines simply charged the same prices

that United Airlines charged, then could this action be illegal because it is a form of "silent collusion?"

A. There is no such term in microeconomics known as "tacit" or "silent collusion."

B. Matching the prices of the price leader firm is a good example of a competitive market.

C. The U.S. Anti-Trust Department has always considered this business behavior as suspicious

and it does consider this pricing strategy to be illegal.

D. The famous 1982 anti-monopoly IBM court case said that this pricing strategy within an

industry is legal as long as the firms fill out quarterly reports to keep the U.S. Anti-Trust

Answer 1

D

Step-by-step explanation:

The airline industry is an example of an oligopoly

An Oligopoly is when there are few large firms operating in an industry. While, a monopoly is when there is only one firm operating in an industry.

Oligopolies are characterised by :

price setting firms

product differentiation

profit maximisation

high barriers to entry or exit of firms

downward sloping demand curve

the action taken by the other airlines is known as tacit collusion.

Tacit collusion is when other companies adopt the price of the price leader

Tacit collusion is not illegal while the explicit collision is illegal.