Two Firms Would Sometimes Be Better Off If They Got

Multiple Choice

Two firms would sometimes be better off if they got together and agreed to charge a high price, rather than to compete and risk having to charge a lower, competitive price.What is the greatest deterrent to this strategy?

A) The firms may find that the price they charge is greater than the price that would maximize their profits.
B) An agreement by firms to charge high prices is illegal. The government can fine the firms and send their managers to jail.
C) Consumers may resent having to pay high prices and not buy from either of the firms.
D) One of the firms may decide to lower its price and take business away from the firm that charged the high price.