Asked by Summer Combs on Sep 24, 2024
Verified
The problem of "double marginalization" is
A) The retail price being too low due to an exclusion of both manufacturer and retailer markup
B) The retail price being too high due to an inclusion of manufacturer markup
C) The retail price being too high due to an inclusion of both manufacturer and retailer markup
D) The retail price being too high due to an exclusion of retailer markup
Double Marginalization
A scenario in which two or more firms at different stages of a supply chain apply their own markups, leading to inefficiencies and inflated prices for consumers.
Retail Price
The cost at which goods or services are sold to the public, typically higher than the wholesale price to include a markup for profit.
Manufacturer Markup
The difference between the cost to produce a good and its selling price, often added by manufacturers to cover costs and generate profit.
- Ascertain the underlying causes and resulting impacts of double marginalization.
Verified Answer
DV
David Velez4 days ago
Final Answer :
C
Explanation :
Double marginalization refers to the problem of both the manufacturer and the retailer adding markups to the price of a product, which can result in a higher retail price than necessary. This leads to decreased demand for the product and ultimately lowers overall profits. Therefore, the retail price being too high due to an inclusion of both manufacturer and retailer markup (Option C) is the correct answer.
Learning Objectives
- Ascertain the underlying causes and resulting impacts of double marginalization.