Which of the following best defines exclusive dealing agreements in economics?

• A. Agreements between firms to divide markets among themselves.
• B. Contracts in which a supplier prohibits a buyer from purchasing goods from competing suppliers.
• C. Arrangements where firms agree to set prices at a certain level.
• D. Contracts that require buyers to purchase a bundle of products together.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of exclusive dealing agreements. These are contracts where a supplier restricts the buyer's ability to purchase goods from competing suppliers.
2. Step 2: Recognize that exclusive dealing agreements are used to limit competition by preventing buyers from sourcing products from rival firms.
3. Step 3: Differentiate exclusive dealing from other types of agreements such as market division (where firms divide markets), price-fixing (where firms agree on prices), and bundling (where buyers must purchase products together).
4. Step 4: Identify that the key characteristic of exclusive dealing is the supplier's prohibition on the buyer purchasing from competitors, which can affect market competition.
5. Step 5: Conclude that the best definition of exclusive dealing agreements is: 'Contracts in which a supplier prohibits a buyer from purchasing goods from competing suppliers.'