Sometimes a Firm or an Individual Deliberately Sets Prices to Incur

question 13

Multiple Choice

Sometimes a firm or an individual deliberately sets prices to incur losses for a long time, either to eliminate a competitor, or to inhibit competition in the expectation that the firm or individual will be able to recoup its losses later by charging prices above competitive levels. According to the textbook, what is the term for this?

• A) price fixing
• B) bid rigging
• C) price discrimination
• D) predatory pricing

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Definitions:

Gross Profit

The difference between revenue and the cost of goods sold before accounting for certain other costs such as salaries, administrative expenses, and taxes.

Credit Terms

The conditions under which credit will be extended to a customer, including the repayment time frame and any applicable interest or discounts for early payment.

Credit Period

The amount of time allowed by a seller for a buyer to pay for a purchase, often used in trade credit agreements.

Source Documents

Original records that contain the details to support business transactions, such as invoices, receipts, and contracts.