Which of the Following Is True of FOB-Origin Pricing

question 12

Multiple Choice

Which of the following is true of FOB-origin pricing?

• A) It is a strategy in which the company charges the same price plus freight to all customers.
• B) It is a costly option for customers who are located near the company.
• C) It charges all customers the freight cost from a base city to the customer location.
• D) It is an expensive alternative for customers in distant locations.
• E) It is a strategy in which the seller absorbs all or part of the freight charges.

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Definitions:

Negative Externality

A negative effect or cost suffered by a third party due to an economic transaction they were not involved in.

Socially Optimal Price

The price of a good or service that reflects the true cost to society, accounting for externalities and ensuring allocative efficiency.

Transaction Costs

Expenses incurred when buying or selling goods and services, which can include fees, taxes, and other costs.

Externality Problem

A situation where the actions of individuals or businesses result in benefits or costs to others that are not reflected in market prices.