An example of vertical foreclosure is when a firm:
A) temporarily prices below its marginal cost to close competitors out of the market.
B) merges with a rival firm with the intention of eliminating the rival firm's product from the market.
C) that controls an essential upstream input refuses to sell to other downstream firms that need the input.
D) merges with a rival firm with the intention of eliminating the rival firm's product from the market and that controls an essential upstream input refuses to sell to other downstream firms that need the input.

Question

Quizplus · Accepted Answer

Vertical foreclosure occurs when a firm controls an essential upstream input and uses this control to exclude or discriminate against downstream rivals. The scenario described in option C – a firm that controls an essential upstream input refusing to sell to other downstream firms – is the best example of vertical foreclosure. The other options describe anticompetitive behavior, but not necessarily vertical foreclosure.

An Example of Vertical Foreclosure Is When a Firm