Question 1

Which of the following statements about the Competition Act is NOT true?

Accepted Answer

Resale price maintenance is actually illegal under the Competition Act. This refers to when a supplier requires a retailer to sell their product at a certain price, thereby eliminating competition between retailers. The Act aims to promote competition and prevent anti-competitive practices.

Question 2

The fashion buyer for Neiman Marcus is in Italy to view the new collections and to order for the coming season.In Milan,she negotiates a good price for a quantity of shoes in a range of sizes and styles at FOB factory.This means that:

Accepted Answer

FOB factory means that the ownership of the shoes passes from the factory to Neiman Marcus at the point of loading. Therefore, Neiman Marcus selects the mode of transportation, pays the freight charges, and is responsible for any damage while the shoes are in transit.

Question 3

Price fixing is:

Accepted Answer

Price fixing refers to a group of companies conspiring together to set prices for goods or services, which can harm competition and lead to higher prices for consumers. Option A relates to exclusive dealing, option B relates to predatory pricing, and option C refers to price discrimination.

Question 4

A hardware store advertises a 3/8" Black & Decker power drill for $29.95.You enter the store intending to purchase the drill.The salesperson informs you that they are all sold out.She tells you that the "sale" drills were factory seconds and that if you are going to be doing any kind of serious woodworking,you should buy the Model 3309,which sells for $49.99.This scenario has elements of which type of deceptive pricing?

Accepted Answer

This scenario has elements of bait and switch pricing as the store advertised a low-priced item but did not have it in stock and instead tried to upsell the customer to a more expensive item.

Question 5

Price discrimination is:

Accepted Answer

Price discrimination is the practice of charging different prices to different buyers for goods of like grade and quality. It is legal as long as it does not involve anti-competitive behavior, such as unfairly targeting a particular group or eliminating competition. A and B are incorrect as they do not match the definition of price discrimination. D is incorrect as it describes price fixing, which is illegal.

Question 6

Central Ice Machine Company is located in Omaha,Nebraska,sells Frick,Sullair,York,and Fes Fuller ammonia refrigeration parts.The company ships using FOB origin pricing.Which of the following statements about the shipment of a Frick reciprocating compressor is true?

Accepted Answer

FOB origin pricing means the buyer pays for shipping from the point of origin. Therefore, a buyer in Albany, New York, will pay more shipping charges than a buyer in Lincoln, Nebraska, and Central Ice Machine will not pay any shipping costs.

Question 7

Uniform delivered pricing means:

Accepted Answer

Uniform delivered pricing means that the price set by the seller includes all transportation costs, so the buyer does not need to pay any extra charges for shipping or delivery. This simplifies the process of buying goods and ensures that the buyer knows the total cost upfront. Options A, B, and C all refer to different concepts of title or ownership of goods, which are not directly related to pricing.

Question 8

When buyers and sellers are separated by vast distances,geographical adjustments may be made to reflect the cost of transportation of the products from sellers to buyers.Which method of quoting prices would be chosen by a seller who wants to maximize profits?

Accepted Answer

FOB origin pricing would be the best choice for a seller who wants to maximize profits when buyers and sellers are separated by vast distances. This pricing method requires the buyer to pay for transportation costs, allowing the seller to set a lower price for the product. The other methods (uniform delivered pricing, single-zone pricing, and multiple-zone pricing) include transportation costs in the price, which could result in higher prices and lower profits for the seller.

Question 9

All of the major wireless providers in Canada (Bell,Telus,Rogers,Shaw,MTS,and Bell Aliant)decide that beginning next year all smartphone data plans will be $75 per GB,even though their delivery costs are far less.This activity is known as:

Accepted Answer

This activity is known as price fixing, where multiple firms agree to set the same price for their products or services, even though their costs are different. In this case, all the major wireless providers in Canada have agreed to set the same price for smartphone data plans, which is higher than their delivery costs. This reduces competition and harms consumers as they have to pay higher prices for the same service.

Question 10

Mark Johnson,the manager of a discount consumer electronics store,has been approached by the manufacturer of a popular and profitable line of compact disk storage racks regarding the retail price charged for the racks at Johnson's store.The manufacturer's representative has implied that if Johnson doesn't raise the retail prices for the storage racks to those charged by the manufacturer's non-discount customers,Johnson's supply of racks may be severely curtailed.The manufacturer is guilty of attempting:

Accepted Answer

The manufacturer is attempting to engage in resale price maintenance by pressuring the retailer to raise their prices to match those charged by non-discounted customers. This practice is illegal under antitrust laws, as it restricts competition and can result in higher prices for consumers.

Question 11

To promote their business,some psychics advertise free tarot card readings and other insights into their customers' futures on television.Unfortunately,this "free reading" has cost some unsuspecting callers as much as $700 in phone charges.This sort of deceptive pricing practice would be monitored by the:

Accepted Answer

The Canadian Competition Bureau is responsible for monitoring deceptive marketing practices, including misleading advertising and pricing practices in Canada.

Question 12

All of the following statements about the Competition Act are true,except:

Accepted Answer

It is not easy to prove that price discrimination under the Competition Act has taken place, as it requires a thorough analysis of the market and the competitive dynamics. The other options (A, B, and C) are true statements about the Competition Act.

Question 13

An established provider of high-definition television service does not like the new startup that has decided to offer HD television in the same market area.As such,the established provider lowers their prices to half of what the new startup is charging,in hopes of forcing them into bankruptcy.This activity is known as:

Accepted Answer

Predatory pricing is a strategy used by dominant firms to drive competitors out of business by lowering prices to unsustainable levels. The established provider is offering prices below the cost of providing the service, which may lead to bankruptcy for the new startup. This is an example of predatory pricing. Price fixing is an agreement between competing firms to set prices to achieve higher profits, while price discrimination involves charging different prices to different groups of customers based on their willingness to pay. Deceptive pricing involves misleading customers about the actual prices of goods or services.

Question 14

Brake-O is a franchise company that repairs brakes in cars and trucks.A radio ad for the company warned potential customers to "not fall prey to bait-and-switch schemes." The ad was telling potential customers to:

Accepted Answer

The radio ad warns customers about falling prey to bait-and-switch schemes which means that they should be wary of brake repair services that are priced low because the services may try to sell customers a much higher priced service once the customer enters the store.

Question 15

Montreal bases Yellow Pages Group,publisher of the Yellow Pages,suggests that for every dollar an advertiser invests in the Yellow Pages,this will return to them on average twenty six dollars in sales.The Yellow pages,however suggests that different categories will have higher returns.Based on this they will charge according to the category.What pricing policy is the Yellow Pages following?

Accepted Answer

The Yellow Pages is following a flexible price policy by charging different rates according to the category that the advertiser belongs to. They recognize that different categories will have different returns on investment and adjust their pricing accordingly.

Question 16

Many cruise lines pay the customers airfare to the point of cruise departure.What type of price adjustment are the cruise lines using?

Accepted Answer

The answer of Many cruise lines pay the customers airfare...

Question 17

In one of its least favourite actions,Amazon.com was caught fiddling with its price tags.Avid Blu-Ray shoppers found that the online store was offering different customers different prices for the same Blu-Ray,and complained vociferously.Amazon was caught red-handed.It was,company officials admitted,trying to see how much it could charge for an item before shoppers balked.No matter what the reasoning behind it,Amazon.com was using:

Accepted Answer

Price discrimination refers to selling the same product or service at different prices to different consumers. Amazon was offering different prices for the same Blu-Ray to different customers, which is a clear example of price discrimination. The company was trying to test how much it could charge before customers stopped buying, which is a common practice among online retailers. However, this practice can lead to customer dissatisfaction and can harm the company's reputation in the long run.

Question 18

FOB origin pricing is a method of pricing where:

Accepted Answer

FOB origin pricing means that title of the goods and responsibility for the goods transfer from the seller to the buyer at the point of loading onto the transportation, therefore the price the seller sets does not include transportation costs. In FOB destination pricing, the title passes to the buyer only on delivery to the final destination. Therefore, option B is incorrect. Option A refers to consignment sales, and option D refers to freight prepaid pricing, but they do not relate to FOB origin pricing.

Question 19

Geographic adjustments are made by manufacturers or wholesalers to:

Accepted Answer

Geographic adjustments are made by manufacturers or wholesalers to cover transportation costs. This may include costs associated with shipping, storage, and distribution of goods to different locations.

Question 20

"The customer is our enemy; the competitor is our friend." That's the unofficial world-view of $11-billion-in-sales Archer Daniels Midland (ADM),according to FBI mole-executive Mark Whitacre in an interview.Given this information,which of the following illegal pricing practices would ADM have been most likely to engage in?

Accepted Answer

Given ADM's world-view that the customer is the enemy and the competitor is the friend, it is likely that they would engage in anti-competitive practices such as price fixing, which involves collusion with competitors to set prices at a certain level. This would be in line with their belief that competitors are to be treated as friends.

Quiz 13: Pricing Products and Services