DECA Sports and Entertainment Marketing Practice Exam

What does price fixing involve?

1. Setting prices independently by each business

2. Businesses conspiring to charge high prices

3. Adopting price strategies based on market conditions

4. Reducing prices during sales events

The correct answer is: Businesses conspiring to charge high prices

Price fixing involves businesses conspiring to set the prices of goods or services at a certain level, typically to achieve higher profit margins without the influence of competitive market forces. This collusion among companies undermines the principle of a free market, where prices are determined by supply and demand. When businesses agree to charge a specific price or raise prices uniformly, it restricts competition and can lead to consumer harm, as it eliminates price variations and options for buyers. This practice is illegal in many jurisdictions because it disrupts fair competition and can lead to inflated prices that do not reflect the actual value or cost of the goods or services being provided. The other options describe scenarios where businesses operate independently (setting prices on their own, adopting strategies based on market conditions, or reducing prices), which aligns with competitive practices rather than the collusion inherent in price fixing.