QQuestionBusiness Law
QuestionBusiness Law
Which of the following is an example of collusion?
A. A company decides to invest in new technology to improve its product.
B. Two competing companies secretly agree to set their prices at the same high level.
C. A company decides to expand its business into a new geographic area.
D. Two competing companies decide independently to lower their prices to increase sales.
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Answer
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Step 1: Understand the definition of collusion
Collusion refers to a secret agreement between two or more parties to limit competition, typically by restricting production or fixing prices. This agreement is designed to gain an unfair market advantage and can lead to higher prices, lower quality products, and less choice for consumers.
Step 2: Analyze the options
Let's analyze each option to determine if it represents an example of collusion: A. A company decides to invest in new technology to improve its product. - This option describes a single company investing in its own growth and improvement, not a secret agreement with other parties. Thus, it is not an example of collusion. B. Two competing companies secretly agree to set their prices at the same high level. - This option describes a secret agreement between competitors to fix prices, which restricts competition and leads to higher prices for consumers. This is a clear example of collusion. C. A company decides to expand its business into a new geographic area. - This option describes a single company's decision to grow its business, not a secret agreement with other parties. Thus, it is not an example of collusion. D. Two competing companies decide independently to lower their prices to increase sales. - This option describes two companies making independent decisions to lower their prices, not a secret agreement to fix prices or restrict production. Thus, it is not an example of collusion.
Final Answer
The correct answer is option B: Two competing companies secretly agree to set their prices at the same high level. This is an example of collusion as it involves a secret agreement between competitors to restrict competition and fix prices, leading to higher prices for consumers.
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