Asked by Arindam Dutta on Sep 24, 2024
Verified
Vertical relationships can increase profits through
A) preventing firms from evading regulation
B) creating a double-markup problem
C) making the incentives of manufacturers and retailers unaligned
D) facilitating price discrimination
Vertical Relationships
Connections between companies or entities at different stages of the production process, often involving suppliers and buyers.
Price Discrimination
A pricing strategy where identical or substantially similar goods or services are sold at different prices to different buyers.
Profits
Earnings that exceed the costs and expenses incurred in operating a business.
- Understand the concept of vertical relationships between manufacturers and retailers.
- Understand the strategies manufacturers use to enforce price discrimination.
Verified Answer
HD
Hitesh Deshpandeabout 21 hours ago
Final Answer :
D
Explanation :
Vertical relationships can facilitate price discrimination, as manufacturers can sell their products at different prices to different retailers, based on factors such as geographic location and demand. This allows manufacturers to capture more consumer surplus and increase profits. A double markup problem and misaligned incentives can actually decrease profits, while preventing firms from evading regulation is not directly related to increasing profits.
Learning Objectives
- Understand the concept of vertical relationships between manufacturers and retailers.
- Understand the strategies manufacturers use to enforce price discrimination.