Choose ALL correct answers:Which of the followings is/are an example(s) of a tacitly collusive agreement?Group of answer choicesCoke decides to lower its price to get more market share after observing a high price charged by Pepsi.Coke and Pepsi agree to charge a high price for their soft drinks to earn higher profits.Pepsi decides to increase its quantity to earn a higher profit after observing a low quantity supplied by Coke.Coke and Pepsi decide to restrict their supplies together to earn higher profits.Coke and Pepsi both charge a low price for their soft drinks as they try to maximise their profit.
Question
Choose ALL correct answers:Which of the followings is/are an example(s) of a tacitly collusive agreement?Group of answer choicesCoke decides to lower its price to get more market share after observing a high price charged by Pepsi.Coke and Pepsi agree to charge a high price for their soft drinks to earn higher profits.Pepsi decides to increase its quantity to earn a higher profit after observing a low quantity supplied by Coke.Coke and Pepsi decide to restrict their supplies together to earn higher profits.Coke and Pepsi both charge a low price for their soft drinks as they try to maximise their profit.
Solution
Step 1: Read the question carefully and understand what is being asked.
Step 2: Identify the key terms in the question, such as "tacitly collusive agreement" and "examples."
Step 3: Read each answer option and determine if it accurately describes a tacitly collusive agreement.
- "Coke decides to lower its price to get more market share after observing a high price charged by Pepsi" is not an example of a tacitly collusive agreement. It is an example of price competition.
- "Coke and Pepsi agree to charge a high price for their soft drinks to earn higher profits" is an example of a tacitly collusive agreement. It means that the firms are cooperating to keep prices high and earn higher profits.
- "Pepsi decides to increase its quantity to earn a higher profit after observing a low quantity supplied by Coke" is not an example of a tacitly collusive agreement. It is an example of quantity competition.
- "Coke and Pepsi decide to restrict their supplies together to earn higher profits" is an example of a tacitly collusive agreement. It means that the firms are cooperating to restrict supply and earn higher profits.
- "Coke and Pepsi both charge a low price for their soft drinks as they try to maximize their profit" is not an example of a tacitly collusive agreement. It is an example of price competition.
Step 4: Based on the above analysis, the correct answers are "Coke and Pepsi agree to charge a high price for their soft drinks to earn higher profits" and "Coke and Pepsi decide to restrict their supplies together to earn higher profits."
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