Question: Assume that there are only five oligopolists in the national carpet manufacturing industry and they collude to restrict output, thereby maintaining a high price. Under which of the following circumstances is collusion likely to break down and why?

1. The government imposes higher duties on imported carpets.

(b) Several new chains of discount carpet retailers enter the market

(C) One of the firms develops a new cost saving technique of producing carpets.

(e) One of the firms becomes dominant in the industry.

(f) The demand for carpets falls.

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