Limit pricing refers to
A)the highest price a monopolist can set.
B)the highest price that just inflicts a loss on a potential entrant.
C)a strategy used by entering firms in contestable markets.
D)the lowest price a duopoly can set.
E)none of the above.

Question

Quizplus · Accepted Answer

Limit pricing is a strategy used by an incumbent monopolist to deter potential entrants by setting the price of the good at a level where it just inflicts a loss on any potential entrant, making it unprofitable for them to enter the market. This helps the monopolist maintain its market power and avoid the entry of new competitors.

Limit Pricing Refers to