Double markup problems arise because
A) upstream firms have no 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 decrease the demand for the other product

Question

Quizplus · Accepted Answer

Double markup problems occur when upstream and downstream firms have market power and their pricing decisions tend to decrease the demand for the other product. This leads to a situation where both firms increase their prices, resulting in double markups and potentially reduced overall welfare. Therefore, option D accurately describes the cause of double markup problems.

Double Markup Problems Arise Because