What does price fixing refer to?

Price fixing refers specifically to an agreement among firms to charge one price for the same good or service. This practice can eliminate competition, leading to higher prices than would be found in a competitive market. When companies collude to set prices at a certain level, consumers have less choice and are often forced to pay inflated prices due to the lack of competitive pricing.

The significance of this practice is that it is generally considered illegal under antitrust laws because it restricts free-market competition. The other options describe scenarios that either do not accurately represent price fixing or are unrelated to the concept. For instance, charging different prices (the first option) or reducing competitive pricing (the third option) do not capture the essence of what price fixing entails. Similarly, increasing production costs (the fourth option) is not directly related to the agreement about prices among firms. Understanding price fixing is crucial for comprehending how competition operates in the marketplace and the legal frameworks designed to protect consumers.