SUVmart wants to buy its quota of 250 Rhinos from AutoCorp. For the quota system to work efficiently AutoCorp must commit credibly to the:
A) exclusive territory.
B) double markup.
C) retail price.
D) wholesale price.

Question

Quizplus · Accepted Answer

The quota system requires AutoCorp to commit credibly to the wholesale price for SUVmart to be able to buy its quota of 250 Rhinos. This is because the wholesale price is the price at which AutoCorp sells the vehicles to SUVmart, and any change in the wholesale price would affect the cost of the Rhinos to SUVmart, which in turn would affect their ability to sell them at a competitive price to consumers. Therefore, AutoCorp committing credibly to the wholesale price is crucial for the efficiency of the quota system.

SUVmart Wants to Buy Its Quota of 250 Rhinos from AutoCorp