A Price-Cost Squeeze Is a Tactic Used

question 65

Multiple Choice

A price-cost squeeze is a 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:

Price Level

An indicator reflecting the average prices of goods and services in an economy at a given time, showcasing the cost of living and inflation.

Firms' Expectations

The outlook or anticipations of businesses regarding future economic conditions, sales, and profitability, which can influence their investment and production decisions.

Nominal Wage Rates

The amounts of money paid to workers before adjustments for inflation.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often reflected in a price index.