Chapter 64, Problem 1MCQ

To determine

To state: The term used when the firms are cooperating to raise their joint profits.

Answer to Problem 1MCQ

The correct option is a, i.e., Colluding

Explanation of Solution

When the firms cooperate to raise their joint profits, then they are necessarily colluding.

Collusion is generally regarded as conspiracies or combinations or agreements among the sellers to fix or raise prices and to decrease output to rise profits.

Collusion is different from the term cartel, collusion does not essentially require a formal agreement, whether private or public, between the members.