CPP - Certified Pricing Professional Legal and Ethical Constraints Questions and Answers

Question 1

Two major home improvement retailers secretly agree to set a minimum price for all power drills they sell, effectively ending competitive pricing on these items. Which specific illegal pricing practice does this scenario describe?

Accepted Answer

Horizontal price fixing

Answer

Horizontal price fixing occurs when two or more competitors conspire to set prices, price levels, or price-related terms for their goods or services. This is a per se violation of the Sherman Antitrust Act.

Question 2

A large national distributor of office supplies offers a 20% discount to a major corporate chain but only a 5% discount to a small, independently owned store for the same bulk order of paper. Assuming the cost to serve both customers is identical, this practice may be illegal under which U.S. federal law?

Accepted Answer

The Robinson-Patman Act

Answer

The Robinson-Patman Act specifically prohibits anticompetitive price discrimination, which involves a seller charging competing buyers different prices for the same commodity where the effect may be to lessen competition.

Question 3

In the wake of a declared state of emergency due to a hurricane, a local hardware store increases the price of portable generators from $400 to $1,500. This practice is most likely an example of what?

Accepted Answer

Price gouging

Answer

Price gouging is the practice of charging an exorbitant or unfairly high price for essential goods and services during a time of emergency or disaster. Many states have specific statutes that make this practice illegal.

Question 4

A dominant technology company with significant market share prices its new web browser software at $0, incurring substantial losses. Evidence suggests the company's goal is to drive smaller, competing browser companies out of business, after which it plans to monetize the user base through other means. This strategy could be legally challenged as:

Accepted Answer

Predatory pricing

Answer

Predatory pricing is the anticompetitive strategy of setting prices at a very low level, often below production cost, to eliminate competition. Once competitors are driven from the market, the firm can raise prices to monopoly levels.

Question 5

Which of the following is a core principle of ethical pricing that emphasizes being open and clear with customers about the costs and components that make up a final price?

Accepted Answer

Price transparency

Answer

Price transparency is a key ethical principle that involves making pricing information readily available and easy to understand for consumers. It builds trust and allows customers to make informed decisions.

(CPP) Certified Pricing Professional Practice Test

(CPP) Certified Pricing Professional Practice Test

CPP - Certified Pricing Professional Legal and Ethical Constraints Questions and Answers