Which of the Following Scenarios Is an Example of Predatory

question 52

Multiple Choice

Which of the following scenarios is an example of predatory pricing?

• A) Ceramic Corp sells its products below average total costs during off-peak seasons.
• B) Almeida flowers has arrived at an informal agreement with other sellers in the area to charge a very high selling price.
• C) Anton Inc., sells its products for $25 in the U.S, however it can sell the same product for double the price in its home country.
• D) Duyen Inc., is launching a new product and has decided to sell its product below its average variable costs until it drives competitors out of market.

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Definitions:

Fair Value Adjustment

A process of adjusting the book value of an asset or liability to reflect its current market value.

Available-for-Sale

A category of securities that are not classified as held-to-maturity or trading securities, and are recorded at fair value.

Unrealized Loss

A loss that occurs on paper due to a decrease in the value of an investment, but has not been realized through a transaction.

Equity Method Investments

Accounting for investments in which the investor has significant influence over the investee, recognizing proportional earnings of the investee.