C is corrent. In a recession, firms in the industry have lower sales volume, higher average costs per unit, and excess capacity. The resulting profit squeeze makes price cutting more of a temptation, in the hope of gaining sales at the expense of rivals.
A is incorrect. When there are fewer firms in the industry it is easier to achieve price collusion.
B is incorrect. When firms in the industry have similar cost structures, it is easier for them to agree on price.
D is incorrect. When products in the industry are standardized, it is easier to achieve agreement on price.
|
