Predatory pricing is a strategy:
A) whereby an incumbent maintains a price below the monopoly level to prevent entry by potential competitors.
B) whereby a firm enjoys lower costs due to knowledge gained from its past production decisions.
C) whereby a firm temporarily prices below its marginal cost to drive competitors out of the market.
D) used by a vertically integrated firm to squeeze the margins of its competitors.

Question

Quizplus · Accepted Answer

Predatory pricing is a strategy where a firm prices below its marginal cost in the short run to drive its competitors out of the market. The intent behind predatory pricing is to capture a larger market share by eliminating competition, making it difficult for new competitors to enter the market or survive.

Predatory Pricing Is a Strategy