A firm that charges a very low price would be practicing predatory pricing if
A)the price allowed only a small profit.
B)the price would only be profitable if it succeeded in driving a rival out of the market and prices increased afterward.
C)the price allowed profits that were positive but below those earned by other firms.
D)it only offered the low price to its rivals' customers.

Question

Quizplus · Accepted Answer

Predatory pricing involves charging a very low price that is only profitable if it succeeds in driving a rival out of the market, after which prices increase again. This is done with the intention of eliminating competition and allowing the firm to monopolize the market at higher prices. Option A describes a situation where the firm earns only a small profit, but there is no evidence of predatory behavior. Option C describes a situation where the firm earns profits, but they are lower than other firms, which also does not indicate predatory behavior. Option D describes a situation where the firm is selectively offering a low price to its rivals' customers, which may or may not be part of a predatory strategy, but not enough information is given to determine this.

A Firm That Charges a Very Low Price Would Be