39. A licensee is negotiating the terms of a listing agreement with a seller. A commission rate of 7% has been agreed-upon by the brokers in the community, but the licensee is unable to negotiate this rate. The 7% commission is an example of:
Answer: B
The 7% commission is an example of price fixing.
Price fixing occurs when competitors in a market agree on pricing terms, such as commission rates, which can restrict free market competition. In this case, the licensee's inability to negotiate the rate suggests that the 7% commission was predetermined by brokers in the community, constituting price fixing.
A) a disclaimer.
A disclaimer is a statement that denies responsibility or limits liability. It does not pertain to the agreed-upon commission rate and therefore is not relevant to the context of this listing agreement.
B) price fixing.
Price fixing is the correct answer as it describes a situation where businesses agree to set prices at a certain level, eliminating competition. Here, the 7% commission has been established by brokers, making it a clear case of price fixing.
C) competition.
Competition refers to the rivalry among sellers to attract customers. In this context, the established commission rate actually hampers competition rather than promotes it, as it restricts the licensee from negotiating a different rate.
D) inducement.
Inducement involves persuading someone to take a particular action, often through incentives. While commission rates can be a factor in inducement, in this case, the focus is on the inability to negotiate due to pre-established terms, rather than an incentive-based scenario.
Conclusion
The 7% commission exemplifies price fixing, as evidenced by the collective agreement among brokers that limits the licensee's ability to negotiate. All other options fail to accurately describe the situation, as they do not pertain to the context of predetermined commission rates and the implications for market competition.