Yummy foods, a gourmet food store,has stores all over the Chicago area. They hav
ID: 1197793 • Letter: Y
Question
Yummy foods, a gourmet food store,has stores all over the Chicago area. They have a reputation for undercutting prices of any competitor that tries to enter the market until the competitor is driven out of business. Which of the following statements is true?
a.) Yummy foods is using the kinked-demand curve theory
b.) Yummy foods entry deterring strategy is to engage in a price war
c.) Yummy food is engaging in overt collusion
d.) Yummy foods is using price leadership along with the limit pricing model
When a U.S steel, a steel producer, bought control of iron ore companies at the beginning of the 20th century,the company was initiating
a.) an expropriation
b.)a horizontal merger
c.)vertical merger
d.) cartel
Please explain your answers. Thank you.
Explanation / Answer
Yummy foods, a gourmet food store,has stores all over the Chicago area. They have a reputation for undercutting prices of any competitor that tries to enter the market until the competitor is driven out of business. Which of the following statements is true?
b) Yummy foods entry deterring strategy is to engage in a price war
This is because Yummy foods action of cutting prices below the competitor’s price is compelling the competitor to lower its price to match prices of Yummy Foods. By doing this, Yummy food is trying to gain a larger market share.
When a U.S steel, a steel producer, bought control of iron ore companies at the beginning of the 20th century,the company was initiating
c)vertical merger
Since the steel producer and the iron ore companies are from different parts of the supply chain within an industry that produce the same final product. They merge operations in order to make the production process more efficient.
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