Asked by Molly Cantu on Sep 24, 2024
Verified
The problem of "double marginalization" is
A) The retail price being too high due to an inclusion of both manufacturer and retailer markup
B) The retail price being too low due to an exclusion of both manufacturer and retailer markup
C) The retail price being too high due to an exclusion of manufacturer markup
D) The retail price being too low due to an exclusion of retailer markup
Exclusion of Markup
The practice of not including an additional amount to the cost of goods when pricing them, often to maintain competitive pricing.
Double Marginalization
A pricing issue that occurs when two or more entities in the same supply chain add their markup, leading to higher prices for the end consumer.
Retail Price
The price at which a product is sold to the public, usually after including costs of production, distribution, and a markup for profit.
- Understand the precursors and repercussions of double marginalization.
Verified Answer
ED
Enida Demaj3 days ago
Final Answer :
A
Explanation :
Double marginalization refers to a situation where both the manufacturer and the retailer add markups to a product, leading to a higher retail price than necessary. This can result in reduced consumer demand, lower profits for both the manufacturer and retailer, and can also create a barrier to entry for new competitors.
Learning Objectives
- Understand the precursors and repercussions of double marginalization.