A Coffee Shop Chain Opens Across the Street from a Locally-Owned

question 43

Multiple Choice

A coffee shop chain opens across the street from a locally-owned coffee shop.The base expenses for coffee and pastries are similar.However, the chain has corporate backing for support and therefore makes a decision to radically lower prices.Thus, it succeeds in attracting customers to its facility and eventually drives the competition out of business.This is an example of:

• A)price fixing.
• B)price discrimination.
• C)predatory pricing.
• D)referral selling.
• E)resale price maintenance.

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Definitions:

After-Tax Net Income

The amount of profit a company remains with after all tax expenses have been deducted from its total income.

Accounting Rate of Return

A financial metric used to assess the profitability of an investment, calculated as the average annual return over the investment's life divided by the initial investment cost.

Straight-Line Depreciation

An arrangement for apportioning the financial burden of a physical investment throughout its active life in equal yearly disbursements.

Accounting Rate of Return

A financial ratio used to measure the profitability of an investment, calculated as the average annual profit divided by the initial investment cost.