Double markup problems arise when
A) upstream firms have no market power
B) downstream firms have market power
C) upstream and downstream products are unrelated in demand
D) upstream and downstream firm's pricing decisions tend to increase the demand for the other product

Question

Quizplus · Accepted Answer

Double markup problems occur when downstream firms have market power and charge a markup above the cost of acquiring the upstream input, and upstream firms also charge a markup above their costs of production. This often results in higher prices and reduced output, as both firms are incentivized to maximize their profits at the expense of consumers.

Double Markup Problems Arise When