Which of the following is the correct definition of price fixing?

• A. A practice where consumers negotiate prices directly with sellers.
• B. A government policy that sets the minimum wage for workers.
• C. An agreement among competitors to set prices at a certain level rather than allowing market forces to determine them.
• D. A situation where a single firm controls the entire market for a product.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of price fixing. Price fixing occurs when competitors agree to set prices at a certain level instead of letting supply and demand determine prices naturally in the market.
2. Step 2: Review each option carefully to see which one matches this definition. The first option describes consumers negotiating prices, which is not price fixing.
3. Step 3: The second option refers to a government policy setting minimum wages, which is unrelated to price fixing among competitors.
4. Step 4: The third option states that competitors agree to set prices at a certain level, which aligns with the definition of price fixing.
5. Step 5: The fourth option describes a monopoly, where a single firm controls the market, which is different from price fixing as it involves market control rather than collusion.