If the several companies in the tobacco industry produce similar products but have very different marginal costs:

A) they are less likely to engage in tacit collusion than firms with similar costs.
B) they are more likely to engage in tacit collusion than firms with similar costs.
C) prices for tobacco products are more likely to be near the monopoly level than in an industry whose firms have similar costs.
D) output of tobacco products is more likely to be near the monopoly level than in an industry whose firms have similar costs.

Question

Parker Strong · Accepted Answer

Final Answer : A, Explanation :  Firms with very different marginal costs find it harder to engage in tacit collusion because their cost structures and therefore their pricing strategies differ significantly. This makes it challenging to align on prices or output levels without explicit communication, which is illegal in many jurisdictions.

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