Both Lemon Light,Inc

question 102

Multiple Choice

Both Lemon Light,Inc.and Orange Mist Corporation are soft drink distributors in Capital City.The soft drink business is highly competitive,profit margins are razor thin,and both companies are on the brink of bankruptcy.To save themselves,they agree to not sell soft drinks at a price below $3 per six-pack.This is a fair price; it allows both of them to make a fair profit; and the customers still get a relatively inexpensive drink.This action by Lemon Light and Orange Mist is:

• A) Legal,because they set a fair price.
• B) Legal,because they were on the brink of bankruptcy.
• C) Legal,because they did not set an absolute price,but only set a minimum price.
• D) Illegal,because it is horizontal price fixing.
• E) Illegal,because it is vertical price fixing.

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Definitions:

Acquiring Investments

The process of purchasing assets or securities with the expectation of generating income or profit.

Issuing Debt

The process by which a company borrows money through the sale of bonds or other financial instruments to finance its operations or projects.

Lending Money

The act of giving money to another party with the expectation that the money will be paid back, typically with interest.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was put into use.