Which of the following is an aim of a price fixing agreement? a. reducing entry barriers b. increasing profit c. reducing price d. increasing demand
I think the answer is reducing price, but not sure if I am correct.
Price fixing agreements, which are typically illegal, are for the purpose of increasing profits, choice B. Assuming for the sake of argument that the products offered for sale by the participating companies are the same, the only determinant of demand will be price. Any company which sells at a lower price will command a larger share of the market, largely to the exclusion of those who charge higher prices. A price fixing arrangment sets an agreed upon price which leaves the consumer no choice. but to pay the set price. Since the price is the same, everywhere, a business can assume it will sell the same amount as it would at a lower price, therefore its profits will be increased.