Limit pricing is the practice of
A)limiting the amount that can be purchased to drive up prices.
B)threatening to go to the limit in a price war if someone enters your market.
C)charging a monopoly price,but producing a quantity greater than the quantity at which MC = MR.
D)setting the price at the highest level that inflicts a loss on the entrant.
E)charging a price higher than the monopoly price,but producing a quantity greater than the quantity at which MC = MR.

Question

Quizplus · Accepted Answer

Limit pricing is a strategy used by an incumbent firm to deter entry of potential rivals into the market. The incumbent firm sets the price at a level that inflicts a loss on the entrant, making it unprofitable for them to enter the market. By doing so, the incumbent firm is able to maintain its market share and keep potential rivals out. Therefore, the best choice is D).

Limit Pricing Is the Practice of