A Coffee Shop Chain Opens Across the Street from a Locally

question 24

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 local competitor out of business.This is an example of:

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

---

Definitions:

Pauper Labor Fallacy

The incorrect belief that importing goods from countries with lower wage levels hurts the economy of a country with higher wage levels.

Sweatshop Labor Fallacy

The misconception that sweatshop labor is entirely harmful and provides no benefit to workers in developing countries.

Heckscher-Ohlin Theory

An economic theory that suggests countries export what they can most efficiently and abundantly produce.

Absolute Advantage

The ability of a country, company, or individual to produce a good or provide a service more efficiently than competitors.