MICRO

Question 1

With the help of a diagram, explain how collusion between energy suppliers could affect the retail prices paid by consumers. (9)

Answer 1

• Collusion is when firms in the market choose to work together anticompetitively to charge prices at higher levels to profit maximise
• Dominated by 6 firms implies this is an oligopoly market
  When they collude together they have monopoly power
• MONOPOLY DIAGRAM
• This results in higher prices paid for by consumers by restricting price
• This maximises joint profits (explain where MR=MC is profit max)
• Explain how in a competitive market competition helps to drive prives down