ABC Company Purchases Inventory from XYZ Company with the Shipping

question 119

Multiple Choice

ABC Company purchases inventory from XYZ Company with the shipping terms FOB shipping point. This means that:

• A) XYZ Company owns the goods while they are in transit.
• B) legal title passes to ABC Company when they receive the inventory.
• C) XYZ Company will pay the freight on this transaction.
• D) ABC Company will include the goods in their inventory as soon as they leave the shipping dock.

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Definitions:

Perfect Price Discrimination

A pricing strategy where a seller charges the maximum possible price to each customer based on their willingness to pay, capturing all consumer surplus as profit.

Consumer Surplus

The discrepancy between what consumers are prepared and able to spend on a product or service and the actual amount they end up paying.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive, serving as an indicator of producer welfare.

Direct Price Discrimination

A pricing strategy where a business charges different prices to different customers for the same product or service, based on willingness to pay.