Question 1:(a) You are examining and reporting on the market performance of a very small number offirms that are known to often collude in setting…

Question 1:(a) You are examining and reporting on the market performance of a very small number offirms that are known to often collude in setting output prices and quantities. Illustrate andexplain using a diagram what affect this behaviour is most likely to have on the allocation offactors of production.(2.5 marks for the diagram plus 2.5 marks for the explanation)(b) What will happen if one of these firms cheats on the others in some way? Illustrate andexplain using a diagram.(2.5 marks for the diagram plus 2.5 marks for the explanation)

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