To collapse a node means to delete this node and add its child nodes to its parent node. Therefore you cannot perform this operation on the root node. You could e.g. use this option if you feel that the respective node is not well supported and you want to show a polytomy instead.
To perform a collapse operation select the node you want to collapse and choose Collapse node from the edit menu or the context menu or use the keyboard shortcut Ctrl + Del.
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