10. Questionable business practices according to antitrust agencies Complete the
ID: 1122904 • Letter: 1
Question
10. Questionable business practices according to antitrust agencies Complete the following table by indicating whether each of the scenarios describes the concept of tying, resale price maintenance, or predatory pricing Resale Price Predatory Tying Maintenance Pricing Scenario Book Bound sells a wide variety of books to retail bookstores. Book Bound recently published two new books: a popular mystery novel and a much less popular history book. Book Bound requires bookstores to buy 15 copies of the history book for every 120 copies of the mystery novel ordered. Coolaire is the only firm producing refrigerators. It costs $950 to produce a refrigerator, and Coolaire sells each refrigerator for $1,200. After Chillbox, a new firm with the same costs as Coolaire, enters the market for refrigerators, Coolaire starts selling its refrigerators for a price of $600. Televix is a firm that produces televisions. Suppose Televix sells its televisions to retail stores for $900 each and requires those retailers to charge customers at least $930 for each television. True or False: The only reason for Televix to require retailers to sell televisions at a certain price is to reduce competition and extend its market power to the retail market. Therefore, this practice is always economically inefficient. O True FalseExplanation / Answer
Scenario A = Tying could be defined as the practice where one sells goods or services as a mandatory addition to the buying of several goods or services
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Scenario B = Predatory pricing: when one charges a product at a price which is below it's cost. It allows a dominant competitor for knocking out its rivals from the market. Afterwards increasing the prices in order to level the market prices for a substantial time.
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Scenario C = Resale price maintenance (RPM) could be defined as the practice in which a company and the distributor agrees that the distributor would sell the company's product at certain price at or higher price floor or at or lower price ceiling
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