In a specific industry, two dominant firms work together to set prices. We call this

A. competition.
B. collusion.
C. market dominance.
D. market influence.
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The correct answer is B. collusion.

To arrive at this answer, we can break down the question and eliminate the incorrect options through understanding their definitions:

A. Competition refers to the act of two or more firms competing against each other in the market, trying to gain an advantage over one another. It does not involve firms working together to set prices, so this option is incorrect.

C. Market dominance refers to a situation where a single firm or a small group of firms holds a significant share of the market and has the ability to exert control and influence over pricing and market dynamics. While market dominance can sometimes lead to collusive behavior, it is not the term specifically used to describe firms working together to set prices, so this option is also incorrect.

D. Market influence refers to an entity's ability to impact or shape market conditions, but it does not specifically imply collaboration between firms to set prices. Therefore, this option is incorrect.

By process of elimination, we are left with B. collusion as the correct answer. Collusion is when two dominant firms in an industry work together to set prices, rather than competing against each other. This behavior is often illegal as it eliminates competition and can harm consumers by resulting in higher prices and limited choices.