Asked by Devin Felber on Sep 24, 2024
Verified
Double markup problems arise when
A) upstream firms have market power
B) downstream firms have no market power
C) upstream and downstream products are unrelated in demand
D) upstream and downstream firm's pricing decisions tend to increase the demand for the other product
Upstream Firms
Companies that operate in the early stages of the supply chain, typically involved in the extraction or production of raw materials.
Downstream Firms
Companies positioned at the end stages of supply chains, engaging in the processing or selling of final products to customers.
Market Power
The ability of a company or entity to influence the price and output levels in the market.
- Discern the antecedents and consequences of double marginalization.
Verified Answer
MH
Makayla Hardy1 day ago
Final Answer :
A
Explanation :
Double markup problems occur when upstream firms have market power, which means they can charge high prices for their inputs, and downstream firms have to pay these high prices and then mark up their final products even more. This leads to higher prices for consumers and may reduce overall welfare in the market.
Learning Objectives
- Discern the antecedents and consequences of double marginalization.