Question 1

Mark Johnson, the manager of a discount consumer electronics store, was approached by the manufacturer's representative on behalf of a marketer of a popular and profitable line of storage racks. The manufacturer's representative implied that if Johnson didn't raise the retail prices for the storage racks to those paid by the marketer's nondiscount customers, Johnson's supply of racks would be severely curtailed. The manufacturer's representative is guilty of attempting

Accepted Answer

Resale price maintenance occurs when a manufacturer attempts to control the retail price of its products, which is what the manufacturer's representative is attempting by pressuring Johnson to raise prices.

Question 2

Price fixing is

Accepted Answer

Price fixing is an illegal agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand.

Question 3

Price fixing is illegal under the

Accepted Answer

The Sherman Act prohibits anticompetitive practices, including price fixing, which is an agreement between competitors to raise, lower, or stabilize prices or competitive terms.

Question 4

Resale price maintenance was declared illegal in 1975 under the

Accepted Answer

The Consumer Goods Pricing Act of 1975 made it illegal for manufacturers to enforce resale price maintenance, allowing retailers to set their own prices.

Question 5

The Robinson-Patman Act covers promotional allowances as well as discounts. To legally offer promotional allowances to buyers, the seller must do so on a(n) ________ basis to all buyers distributing the seller's products.

Accepted Answer

The Robinson-Patman Act requires that promotional allowances be offered on a proportionally equal basis to all buyers to prevent price discrimination and ensure fair competition.

Question 6

The practice of charging different prices to different buyers for goods of like grade and quality is referred to as

Accepted Answer

Price discrimination is the practice of charging different prices to different buyers for goods of like grade and quality.

Question 7

Which of these statements about geographical adjustments to price is most accurate?

Accepted Answer

Basing-point pricing methods are used in industries where freight expenses significantly impact the total cost to the buyer, as they help standardize shipping costs from a specific location.

Question 8

Price discrimination is

Accepted Answer

Price discrimination involves charging different prices to different buyers for the same goods or services, based on factors like willingness to pay, rather than differences in cost.

Question 9

The Robinson-Patman Act allows for price differentials to different customers under several conditions. Which of these practices would be permitted?

Accepted Answer

The Robinson-Patman Act allows for price differentials to different customers under several conditions, including when price differences charged to different customers do not exceed the differences in the cost of manufacture, sale, or delivery resulting from different methods or quantities in which such goods are sold or delivered to buyers.

Question 10

Price discrimination is illegal under the

Accepted Answer

The Robinson-Patman Act specifically addresses price discrimination, making it illegal for sellers to charge different prices to different buyers if it harms competition.

Question 11

Price deals that mislead consumers fall into the category of

Accepted Answer

Price deals that mislead consumers fall into the category of deceptive pricing.

Question 12

Vertical price fixing involves controlling agreements between independent buyers and sellers whereby sellers are required to not sell products below a minimum retail price. This practice is also called

Accepted Answer

Resale price maintenance is the practice where manufacturers and retailers agree on the minimum price at which a product can be sold, which is a form of vertical price fixing.

Question 13

Vertical price fixing refers to

Accepted Answer

Vertical price fixing involves agreements between buyers and sellers to maintain a minimum resale price, which is a form of price control.

Question 14

Two or more competitors explicitly or implicitly setting prices is referred to as

Accepted Answer

Horizontal price fixing occurs when competitors at the same level of the market structure agree to set prices, rather than letting competition in the market determine them.

Question 15

All of these are pricing practices that are closely scrutinized because of potential unethical or illegal actions except which?

Accepted Answer

Showrooming is a consumer behavior where customers examine products in a physical store and then purchase them online, often at a lower price. It is not a pricing practice by companies and is not scrutinized for being unethical or illegal.

Question 16

A conspiracy among firms to set prices for a product is referred to as

Accepted Answer

Price fixing is an agreement among firms to set prices for a product.

Question 17

Advertising such as "Retail Value $100, Our Price $85" is deceptive if

Accepted Answer

The advertisement is deceptive if a verified and substantial number of stores in the market area do not price the item at $100, as it implies a false sense of savings.

Question 18

In a controversial move, Amazon.com was caught manipulating its prices. Avid DVD buyers, buying in quantity for resale, found that the online retailer was offering different customers different prices for the same DVD, and complained vociferously. Company officials admitted that the company was trying to see how much it could charge for an item before buyers balked. Amazon was caught attempting

Accepted Answer

Amazon was attempting price discrimination, which involves charging different prices to different customers for the same product without a cost basis for the difference.

Question 19

Controlling agreements between independent buyers and sellers whereby sellers are required to not sell products below a minimum retail price is called

Accepted Answer

Vertical price fixing occurs when manufacturers or wholesalers set minimum prices that retailers must adhere to, controlling the resale price of products.

Question 20

Five pricing practices are scrutinized because of potential unethical or illegal actions, including which of these?

Accepted Answer

Price fixing is considered unethical and illegal as it involves an agreement between competitors to set prices at a certain level, which restricts competition and harms consumers.

Quiz 14: Arriving at the Final Price