When an industry has excess capacity, market prices may drop well below their historical average. If this drop is temporary, it is called ________.
A) distress prices
B) dropped prices
C) low-average prices
D) substitute prices

Question

Quizplus · Accepted Answer

Distress prices are temporary drops in market prices that occur when an industry has excess capacity. These prices occur as a result of companies competing fiercely for market share, driving down prices in the short term.

When an Industry Has Excess Capacity, Market Prices May Drop