Fact Pattern 46-1B (Questions B4-B5 Apply)

question 36

Multiple Choice

Fact Pattern 46-1B (Questions B4-B5 apply)
Natural Gas, Inc., and Olio Energy Company refine and sell natural gas. To limit the supply of natural gas on the market and thereby raise prices, Natural Gas and Olio Energy agree to buy "excess" supplies from dealers and "dispose" of it.
-Refer to Fact Pattern 46-1B. The agreement between Natural Gas and Olio Energy is

• A) a horizontal restraint.
• B) none of the choices.
• C) a resale price maintenance agreement.
• D) a vertical restraint.

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Definitions:

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance premiums.

Relevant Range

The range of activity within which assumptions made about cost behavior are valid. Beyond this range, fixed and variable cost patterns may change.

Break-even Point

The level of sales or production at which total revenues equal total costs, resulting in neither profit nor loss.

Contribution Margin

The selling price of a product minus the variable cost per unit, used to cover fixed costs and contribute to net profit.