Consider a market in which one firm controls 80 percent of the market. Suppose a new firm tries to enter the market, and the firm with market power responds by temporarily cutting its prices to very low levels. This practice is known as:
A)predatory pricing.
B)monopoly pricing.
C)aggressive pricing.
D)All of these are exemplified by this practice.

Question

Quizplus · Accepted Answer

Predatory pricing is a strategy where a dominant firm sets prices at a very low level with the intention of driving competitors out of the market or deterring new entrants. This is exactly what is described in the scenario.

Consider a Market in Which One Firm Controls 80 Percent