What are three characteristics of industries primed for collusion? (Choose THREE.)

Collusion, where firms coordinate to limit competition and increase profits, is more sustainable under certain industry conditions. These include: 1) A small number of rivals (oligopoly), which makes it easier to reach, monitor, and enforce an agreement. 2) The presence of a price leader, a dominant firm that can set a price that others follow, facilitating tacit collusion without a formal agreement. 3) Homogeneous products, which simplifies competition to a single dimension (price), making it easier to agree on a price and detect cheating.

D. High product differentiation makes collusion difficult because firms compete on many attributes (quality, brand, service), not just price.

E. Perfect information for consumers makes collusion unstable, as consumers can easily identify and switch to a firm that cheats by lowering its price.

F. Free entry and exit undermines collusion, as high profits would attract new firms, increasing supply and driving prices down.

1. Pindyck, R. S., & Rubinfeld, D. L. (2018). Microeconomics (9th ed.). Pearson. Chapter 12, "Monopolistic Competition and Oligopoly," Section 12.5, "Cartels."

2. Tirole, J. (1988). The Theory of Industrial Organization. MIT Press. Chapter 5, "Cartels and Tacit Collusion."

3. MIT OpenCourseWare. (2018). 14.01 Principles of Microeconomics, Fall 2018. Lecture 18: Oligopoly I. Available at: https://ocw.mit.edu/courses/14-01-principles-of-microeconomics-fall-2018/