A Price-Cost Squeeze Is Tactic Used

question 64

Multiple Choice

A price-cost squeeze is tactic used

• A)to prevent potential competitors from entering a market.
• B)by a vertically integrated firm to squeeze the margins of its competitors.
• C)by a vertically integrated firm to charge downstream rivals a prohibitive price for an essential input; forcing rivals to use more costly substitutes or exit the industry.
• D)to gain a critical mass of consumers by charging an initial low price.

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Definitions:

Reverse Stock Splits

A corporate action in which a company reduces the total number of its outstanding shares to increase the share price without altering the company's market capitalization.

Shares Outstanding

The total number of shares of stock that are currently owned by shareholders, including those held by institutional investors and restricted shares.

Share Price

The price of a single share of a company's stock, determined by market supply and demand.

Stock Dividend

Increases the number of shares outstanding, but at a slower rate than splits. Current shareholders receive additional shares on some proportional basis. Thus, a holder of 100 shares would receive 5 additional shares at no cost if a 5% stock dividend were declared.