Which of the following is an obstacle to collusion in an oligopolistic industry?

• A. Perfect information among firms
• B. Stable market demand
• C. A large number of firms in the industry
• D. Homogeneous products

Answer: (C)

Verified step by step guidance

1. Understand that collusion in an oligopolistic industry occurs when firms cooperate to set prices or output to maximize joint profits, often acting like a monopoly.
2. Identify factors that make collusion easier or harder. For example, perfect information among firms and stable market demand generally facilitate collusion because firms can better monitor and predict each other's behavior.
3. Recognize that a large number of firms in the industry makes collusion difficult because coordinating and enforcing agreements becomes more complex as the number of participants increases.
4. Note that homogeneous products can make collusion easier since firms compete mainly on price, making it simpler to agree on a common price or output level.
5. Conclude that among the options, a large number of firms is an obstacle to collusion because it increases the difficulty of maintaining cooperation and monitoring cheating.