Consider the practice of limit pricing by a dominant firm? Limit pricing is most appealing when the dominant firm has a cost advantage over the fringe firms.

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Quizplus · Accepted Answer

Limit pricing is a strategy adopted by a dominant firm to discourage potential entry by setting a low price that the entrant cannot match without incurring losses. It is more effective when the dominant firm has a cost advantage over the entrant, as it can sustain lower prices for longer periods without incurring losses. Hence, the statement is true. Limit pricing is a strategy where a dominant firm sets a price low enough to deter potential rivals from entering the market. It is most effective when the dominant firm has a cost advantage over the potential rivals, making it difficult for them to match the low price and still make a profit. Therefore, the statement is true.

Consider the Practice of Limit Pricing by a Dominant Firm