​The Conditions in Which Vertical Relationships Can Enhance a Firm's

question 34

Multiple Choice

​The conditions in which vertical relationships can enhance a firm's ability to price discriminate include

• A)​the manufacturer's product is of value to just one type of customer
• B)the costs of arbitraging the price difference across markets is small
• C)the manufacturer acquires the distributer in the higher priced market
• D)​competition provides little ability for the manufacturer to price above marginal cost

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Definitions:

Liquidity Risk

The risk that an asset cannot be sold or converted into cash quickly enough to meet short-term financial obligations without a significant loss in value.

Bond

A fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental) which pays periodic interest payments and the return of the principal at maturity.

Risk Premiums

The extra return or premium demanded by investors for holding riskier assets, above the risk-free rate.

Nominal Risk-Free Rate

The rate of return on an investment with no risk of financial loss, not adjusted for inflation.