Because It Was the Initial Year of Production, Only 3000

question 63

Multiple Choice

Because it was the initial year of production, only 3000 units of a new model car were built. Some auto dealers got together and agreed that they would sell the cars only if the customer was willing to pay several thousand dollars over the sticker price. This is an example of

• A) price gouging.
• B) smart business practice.
• C) price fixing.
• D) collusion.
• E) price lining.

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Definitions:

Controlling Interest

Ownership of a portion of a company that is large enough to control or influence decision-making and operations.

Significant Influence

The ability of an investor to affect decisions of the investee in which it holds a significant but not controlling interest, typically through ownership of 20% to 50% of voting shares.

Investee

The entity in which an investment is made, usually implying that the investor has significant influence but not full control over it.

Equity Method

An accounting technique used to record investments in associate companies where the investor has significant influence but not full control.