In an oligopolistic market structure, firms are found to be colluding to set prices and restrict output, leading to consumer welfare loss. Which of the following statements best describes the impact of this collusion on consumer welfare and market efficiency?
1
Collusion leads to a lower price for consumers and increases overall market efficiency
2
Collusion causes prices to rise above competitive levels, resulting in a deadweight loss and reduced consumer surplus
3
Collusion is beneficial as it allows firms to achieve economies of scale, lowering prices in the long run
4
Collusion does not affect consumer welfare because it only impacts the profits of the colluding firms
5
Question Not Attempted