Question

price fixing the welfare costs of minimum price fixing

Answer 1

Price fixing is an agreement between sellers or buyers that all players will sell the product at a minimum price or all buyers will buy the product at the same minimum price.

In horizontal price fixing when competitors agree on charging the same minimum price to consumers. This would increase the welfare cost as competitors would keep a high minimum price which is well above the equilibrium price which will lead to consumers spending more.

Governments also set a minimum price for labour wages, which does not fully cover the living costs thereby increasing welfare costs as they have to resort for multiple jobs to cover their living costs.