CFA Practice Question

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CFA Practice Question

Which of the following facilitates collusion?

A. A large number of firms
B. Difficulty in detecting cheating on the collusive agreement
C. Lax enforcement of the antitrust laws
D. Unstable market demand
Correct Answer: C

Lax enforcement of antitrust laws facilitates collusion since the lower probability of being punished for colluding will reduce the costs of collusion.

User Contributed Comments 2

User Comment
indrasenareddy all seem to be possible. any thoughts to eliminate other choices.
dybacis A, it is more difficult to agree with more firms involved.
B, if firms cannot be detected cheating there is no incentive to maintain the collusion agreement.
D, unstable market demand would change comparable incentive to be or not be in the collusion
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