If a large retailer sold numerous items below cost with the intention of punishing competitors and gaining higher long-run profits by putting those competitors out of business,the retailer would be guilty of ________.
A) price collusion
B) price fixing
C) predatory pricing
D) discriminatory pricing
E) penetration pricing

Question

Quizplus · Accepted Answer

This scenario describes predatory pricing, which occurs when a firm intentionally sells products below their cost in order to drive competitors out of business. The goal is to eventually raise prices once competitors have been eliminated, and the firm has gained a dominant market position. This is illegal under antitrust laws. Choice A (price collusion) and B (price fixing) both describe situations where firms work together to set prices, which is also illegal under antitrust laws. Choice D (discriminatory pricing) refers to charging different prices to different customers based on non-cost factors, such as race or gender, and is also illegal. Choice E (penetration pricing) refers to deliberately setting low prices to gain market share when entering a new market, but it is legal and not intended to harm competitors.

If a Large Retailer Sold Numerous Items Below Cost with the Intention