a)
To state: A factor of the market for higher education that invites tacit collusion.
a)
Explanation of Solution
One reason for the market for higher education that attracts tacit collusion is that the universities propose a small number of products i.e., a small number of programs with a smaller number of tuition levels.
So, this attracts/ calls for tacit collusion. They can also have the same views of the tuition level that families can pay for.
Tacit collusion is when there is no formal agreement between the competitors to collude in order to raise their profits and revenue.
Introduction:
Collusion is generally regarded as conspiracies or combinations or agreements among the sellers to fix or raise prices and to reduce output in order to increase profits.
b)
To state: A factor of the market for higher education that works against tacit collusion.
b)
Explanation of Solution
The aspect of the market for higher education that works contrary to tacit collusion includes large number of universities and the negotiating power of the superior applicants.
Introduction:
Collusion is generally regarded as conspiracies or combinations or agreements among the sellers to fix or raise prices and to reduce output in order to increase profits.
c)
To state: The way with which the university could engage in illegal collusion.
c)
Explanation of Solution
How the universities could engage in illegal collusion are:
- By conducting meetings to create the same/uniform tuition rates.<
- dividing up aspirants so that each is accepted by a limited number of schools( to evade competition )
- Distribute info on scholarship assistance so that applicants will get the same offers from competing schools.
Introduction:
Collusion is generally regarded as conspiracies or combinations or agreements among the sellers to fix or raise prices and to reduce output in order to increase profits.
d)
To state: The ways with which the universities engage in product differentiation.
d)
Explanation of Solution
The ways with which the universities engage in product differentiation are academic standards, overseas programs, location, athletic programs, graduation requirements, faculty, and class size among other areas.
Introduction:
Collusion is generally regarded as conspiracies or combinations or agreements among the sellers to fix or raise prices and to reduce output in order to increase profits.
e)
To explain: How price leadership might work in a university setup.
e)
Explanation of Solution
Price leadership can be achieved in the case of a school, perhaps a prestigious and large university, declaring its tuition before time i.e., early, and then other schools based their tuition on that declaration.
Introduction:
Collusion is generally regarded as conspiracies or combinations or agreements among the sellers to fix or raise prices and to reduce output in order to increase profits.
f)
To state: The type of non-price competition universities are engaged in.
f)
Explanation of Solution
The type of non-price competition universities are engaged in are:
- Bigger dorm rooms
- Offering better food
- Plush students center
- More accomplished faculty members
- Many more similar amenities.
Introduction:
Collusion is generally regarded as conspiracies or combinations or agreements among the sellers to fix or raise prices and to reduce output in order to increase profits.
Chapter 66 Solutions
Krugman's Economics For The Ap® Course
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