Courts in the United States have ruled that pricing is predatory only if companies set prices below the ________.
A) average full cost
B) average variable cost
C) average production cost
D) average fixed cost

Question

Quizplus · Accepted Answer

Predatory pricing occurs when a company sets prices so low that it drives competitors out of the market, allowing the company to later raise prices and gain a monopoly. To determine if pricing is predatory, courts consider whether the prices are below the average variable cost, which includes the cost of materials, labor, and other variable expenses directly related to producing a product. Prices below this level are seen as unsustainable and likely an attempt to drive competitors out of business. The other options (average full cost, average production cost, and average fixed cost) are not as relevant in determining predatory pricing.

Courts in the United States Have Ruled That Pricing Is