Final answer:
Tacit cooperation among oligopoly firms that reduces supply and increases prices is known as tacit collusion, which differs from explicit collusion that involves a formal agreement like a cartel.
Step-by-step explanation:
When tacit cooperation among firms in an oligopoly leads to reduced supply and increased prices, it is known as tacit collusion. Unlike explicit collusion, which involves a formal agreement (like forming a cartel), tacit collusion occurs when businesses implicitly agree to play by certain rules of competition that lead to monopoly-like behavior without any explicit agreement or communication.
For instance, if two soda companies recognize that by limiting their production they can both maintain higher prices, and without communicating they choose to produce less, they are engaging in tacit collusion. This practice often results in competitive markets behaving as monopolies, hurting consumers with higher prices while benefiting the colluding firms with increased profits. However, because there's no formal agreement, such tacit collusion is harder to regulate and prosecute compared to explicit collusion, which is illegal.