Subject - Economics:

Microeconomics

MCQ - 93-4103

Question:

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

Collusive output levels tend to increase, driving the price above competitive levels.
Consumer surplus falls as the price is driven downward.
Collusive output levels tend to decrease, driving the price down to competitive levels.
Consumer surplus falls as the price is driven downward.
Joint profit maximization costs society consumer surplus as the price rises above competitive levels

Correct Answer: E

Explanation:

Colluding members of an oligopoly act as a monopolist, restraining competition, restricting output, and increasing the price.

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269 MCQ for effective preparation of the test of Microeconomics of Economics section.

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