Vertical foreclosure is an example of a firm:
A) engaging in a price-cost squeeze.
B) that merges with a rival firm with the intention of eliminating the rival firm's product from the market.
C) engaging in penetration pricing.
D) that controls an essential upstream input and raises rivals' costs by refusing to sell to other downstream firms that need the input.

Question

Quizplus · Accepted Answer

Vertical foreclosure occurs when a firm controls an essential input and raises the costs of its downstream rivals by refusing to sell to them. This limits competition in the downstream market and can harm consumers by reducing choice and raising prices.

Vertical Foreclosure Is an Example of a Firm