What is a potential consequence of price fixing?

• A. Increased competition among firms
• B. Lower prices for consumers
• C. A lack of market transparency
• D. Stability in consumer confidence

Answer: (C)

Price fixing is an illegal agreement between competing firms to set prices at a certain level, often higher than what would prevail in a competitive market. This practice leads to a lack of market transparency because consumers and other market participants cannot see genuine supply and demand signals. Without transparent pricing, consumers cannot make informed choices based on market conditions, leading to inefficiencies and distrust in the market.

In a price-fixed environment, information about prices becomes distorted, which can result in consumers being unaware of potential alternatives or fair market pricing. This lack of clarity affects their purchasing decisions and overall market dynamics, highlighting the negative effects of such anti-competitive behavior on the economy.

The other options, such as increased competition among firms, lower prices for consumers, or stability in consumer confidence, do not align with the outcomes typically associated with price fixing. Instead, price fixing restricts competition, drives prices up, and can create a less stable market environment for consumers.