Question 1

Predatory pricing is

Accepted Answer

Predatory pricing is illegal according to antitrust laws but it can be difficult to prosecute because it can be argued as competitive pricing.

Question 2

Price deals that mislead consumers fall into the category of

Accepted Answer

Price deals that mislead consumers fall into the category of deceptive pricing, where the price is presented in a way that is likely to mislead consumers. This includes false advertising, hidden fees, and other tactics that can be considered unethical or illegal. Predatory pricing refers to lower prices set by a dominant firm to drive competitors out of business. Price discrimination involves charging different prices to different customers based on various factors. Caveat emptor means "buyer beware," and refers to the idea that consumers are responsible for their own purchasing decisions. Resale price maintenance refers to a manufacturer setting a minimum price for retailers to sell their products.

Question 3

A hardware store advertises a ⅜" Black and Decker Power Drill for $29.95.You enter the store intending to purchase the drill.The salesperson informs you that they are all sold out.She tells you that the "sale" drills were factory seconds and that if you are going to be doing any kind of serious woodworking,you should buy the Model 3309,which sells for $49.99.This scenario has elements of which type of illegal pricing practice?

Accepted Answer

The scenario has elements of bait and switch pricing, as the customer was lured into the store with the advertisement of a cheap drill but was then told that it was sold out and offered a more expensive alternative.

Question 4

Five common forms of misleading pricing include: bait and switch,bargains conditional on other purchases,comparable value comparisons,comparisons with suggested prices,and former price comparisons.What do all these practices have in common? They are all

Accepted Answer

All of the listed practices involve intentionally misleading or deceiving customers with regards to the actual price of a product or service. As such, they are considered illegal and are often difficult to prosecute.

Question 5

Deceptive pricing practices are outlawed by legislation and enforced by which federal agency?

Accepted Answer

Deceptive pricing practices are enforced by the Federal Trade Commission (FTC) under the Federal Trade Commission Act. The FTC is responsible for protecting consumers from unfair or deceptive business practices, including false or misleading pricing information.

Question 6

Predatory pricing refers to

Accepted Answer

Predatory pricing is the practice of using a very low price to drive competitors out of business or to prevent new competitors from entering the market. This can be done to attain a significant market share or to maintain dominance in the market.

Question 7

Which of the following statements about the legal and regulatory aspect of pricing is most accurate?

Accepted Answer

The Federal Trade Commission Act covers predatory pricing,deceptive pricing,and geographical pricing.

Question 8

Advertising such as "Retail Value $100,Our Price $85" is deceptive if

Accepted Answer

The advertisement is deceptive if a verified and substantial number of stores in the market area did not price the item at $100, as it implies a false sense of savings.

Question 9

The practice of offering a bargain that is conditional on the purchase of other products may exist when a buyer is offered the "1-Cent Sales," the "Buy 1,Get 1 Free," or the "Get 2 for the Price of 1" deal.Such pricing is legal only if

Accepted Answer

The practice of offering a bargain that is conditional on the purchase of other products is legal only if the first items are sold at the regular price, not a price inflated for the offer. This ensures that consumers are not misled by false or inflated prices. The other options listed are not necessary conditions for the legality of such pricing.

Question 10

A claim that a price is below a manufacturer's suggested or list price may be deceptive if

Accepted Answer

If a retailer claims that a price is below the manufacturer's suggested or list price, but few or no sales occur at that price in their market area, it may be deceptive. This implies that the price may not actually be a "sale" or "discount," but rather the usual selling price. This could mislead consumers into thinking they are getting a better deal than they actually are.

Question 11

Bob Biltmore owns dozens of very successful print shops throughout the Midwest.Biltmore's shops specialize in low-cost black-and-white copies and feature user-friendly machines consumers can easily operate.In recent months,Biltmore has noticed many more competitors in the areas where his stores are located.In an attempt to eliminate the competition,Biltmore has decided to charge a very low price for his black-and-white copies,a price so low his competitors will be forced out of business.After the competition has been driven out,Biltmore plans to raise the price of his copies.Biltmore is planning to engage in the illegal and unethical practice of

Accepted Answer

Biltmore is engaging in predatory pricing, which involves setting prices so low that competitors cannot compete and are forced out of the market. This is both unethical and illegal, as it constitutes anti-competitive behavior.

Question 12

The Robinson-Patman Act covers promotional allowances as well as discounts.To legally offer promotional allowances to buyers,the seller must do so on a(n)__________ to all buyers businesses distributing the seller's products.

Accepted Answer

The Robinson-Patman Act requires that promotional allowances be offered on a proportionally equal basis to all buyers to prevent price discrimination.

Question 13

To promote their business,some psychics advertise free tarot-card readings and other insights into their customers' futures on television.Unfortunately,this "free reading" has cost some unsuspecting callers as much as $700 in phone charges.This sort of pricing practice would be primarily monitored by the

Accepted Answer

The Federal Trade Commission (FTC) is responsible for monitoring and preventing deceptive and unfair business practices, including misleading advertising and pricing practices.

Question 14

When a firm offers a very low price on a product to attract customers to a store,and once in the store,the customer is persuaded to purchase a higher-priced item,the practice is referred to as

Accepted Answer

This practice is commonly known as bait and switch, where a customer is lured in with a low-priced item only to be persuaded to purchase a higher-priced alternative. This is considered to be deceptive and unethical business practice.

Question 15

Predatory pricing is

Accepted Answer

Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business. This can create a monopoly, allowing the company to raise prices later on.

Question 16

Which of the following statements about geographical pricing is most accurate?

Accepted Answer

FOB origin pricing is a legal form of geographical pricing. The other statements are either inaccurate or incomplete. While geographical pricing can come under government scrutiny, it is not necessarily the pricing policy that receives the most scrutiny. FOB freight-allowed pricing practices may be illegal if they are used to conceal price discrimination, but they are not illegal in and of themselves. Basing-point pricing is also subject to legal restrictions.

Question 17

A unique feature of the Robinson-Patman Act is that it allows for price differentials to different customers under several conditions.Which of the following practices would be permitted?

Accepted Answer

The answer of A unique feature of the Robinson-Patman Act...

Question 18

When a seller represents a price as reduced,the item must have been offered in good faith at a higher price for a substantial previous period.Former price comparisons are deceptive if

Accepted Answer

If a high price was set for the purpose of establishing a reference for a price reduction, it is considered deceptive because the item was never intended to be sold at that higher price and the reduction is not a genuine discount.

Question 19

The practice of charging a very low price for a product with the intent of driving competitors out of business is referred to as

Accepted Answer

Predatory pricing involves charging a very low price for a product with the goal of driving competitors out of business. This is often done with the intention of raising prices once competitors are eliminated, and is illegal in many countries.

Question 20

In the early 1980s,typical round-trip coach airfares from the East Coast to London were more than $500.Then Freddie Laker introduced the People's Express,a competing service into Newark at $350.Major airlines matched his price-and continued to do so until they drove People's Express out of business.Then prices shot back up to over $500.A lawsuit filed under the Sherman Act resulted in the judgment that the major airlines had explicitly tried to destroy a competitor.The experience of People's Express is an example of __________ on the part of the major airlines.

Accepted Answer

The major airlines matched the low price of People's Express and continued to do so until they drove them out of business, which is an example of predatory pricing. The Sherman Act lawsuit also supports this conclusion by stating that the major airlines explicitly tried to destroy a competitor. Price fixing, price discrimination, deceptive pricing, and pricing constraints do not accurately describe the situation.

Quiz 14: Arriving at the Final Price

Predatory pricing is

Price deals that mislead consumers fall into the category of

Five common forms of misleading pricing include: bait and switch,bargains conditional on other purchases,comparable value comparisons,comparisons with suggested prices,and former price comparisons.What do all these practices have in common? They are all

Deceptive pricing practices are outlawed by legislation and enforced by which federal agency?

Predatory pricing refers to

Which of the following statements about the legal and regulatory aspect of pricing is most accurate?

Advertising such as "Retail Value $100,Our Price $85" is deceptive if

The practice of offering a bargain that is conditional on the purchase of other products may exist when a buyer is offered the "1-Cent Sales," the "Buy 1,Get 1 Free," or the "Get 2 for the Price of 1" deal.Such pricing is legal only if

A claim that a price is below a manufacturer's suggested or list price may be deceptive if

The Robinson-Patman Act covers promotional allowances as well as discounts.To legally offer promotional allowances to buyers,the seller must do so on a(n) __________ to all buyers businesses distributing the seller's products.

When a firm offers a very low price on a product to attract customers to a store,and once in the store,the customer is persuaded to purchase a higher-priced item,the practice is referred to as

Predatory pricing is

Which of the following statements about geographical pricing is most accurate?

A unique feature of the Robinson-Patman Act is that it allows for price differentials to different customers under several conditions.Which of the following practices would be permitted?

When a seller represents a price as reduced,the item must have been offered in good faith at a higher price for a substantial previous period.Former price comparisons are deceptive if

The practice of charging a very low price for a product with the intent of driving competitors out of business is referred to as