The price-cost squeeze is
A)a tactic used by a vertically integrated firm to raise rival's costs of inputs, while maintaining final product prices.
B)a strategy where a firm temporarily prices below its marginal costs to drive competitors out of the market.
C)when an incumbent maintains a price below the monopoly price in order to prevent entry.
D)the act of charging a low price initially upon entering a market to gain market share.

Question

Quizplus · Accepted Answer

The price-cost squeeze refers to a tactic used by a vertically integrated firm, where it raises the prices of inputs for its rivals while maintaining the final product prices. This puts pressure on the rivals' profit margins, making it difficult for them to compete with the vertically integrated firm. As a result, the rivals may be forced to exit the market, allowing the vertically integrated firm to increase its market power.

The Price-Cost Squeeze Is