Question

Many economists argue that resale price maintenance

A)   has a legitimate purpose of stopping discount retailers from free riding on the services provided by full service retailers. B)   is price fixing and, therefore, is prohibited by law. C)   is price fixing and, therefore, is prohibited by law and enhances the market power of the producer. D)   enhances the market power of the producer.

Answer 1

Answer- Correct option is 'B'

Many economists argue that resale price maintenance is price fixing and, therefore, is prohibited by law. Price fixing is an agreement among competitors that raises, lowers or stabilized prices or competitive firms. At first, resale price maintenance might seems anticompetitive and therefore detrimental to society. like an agreement among the cartel, it prevents the retailers from competing on price. For this reason, the court have often viewed resale price maintenance as a voilation of the antitrust laws.