A price-cost squeeze is a tactic used:
A) to prevent potential competitors from entering a market.
B) by a vertically integrated firm to squeeze the margins of its competitors.
C) by a vertically integrated firm to charge downstream rivals a prohibitive price for an essential input, forcing rivals to use more costly substitutes or exit the industry.
D) to gain a critical mass of consumers by charging an initial low price.

Question

Quizplus · Accepted Answer

A price-cost squeeze is when a vertically integrated firm charges its rivals a high price for an essential input while keeping the prices low for end consumers. This strategy forces their rivals to either pay the high price or exit the market altogether, while maintaining the firm's monopoly power.

A Price-Cost Squeeze Is a Tactic Used