A company charges low prices (below cost) in geographic areas where competition is intense, and high prices in areas where competition has been eliminated. The firm is engaging in
A) predatory pricing.
B) loss leader pricing.
C) vertical price fixing.
D) subjective pricing.

Question

Quizplus · Accepted Answer

Predatory pricing is a strategy where a company sets very low prices with the intention of driving competitors out of the market, or to prevent new entries into the market. Once the competition is weakened or eliminated, the company can then increase prices. This is consistent with the scenario described.

A Company Charges Low Prices (Below Cost) in Geographic Areas