When diversified firms use the revenues from profitable businesses to subsidize the operations of another business and then set the prices of the subsidized firm's products at a level that is below the subsidized business's cost to produce these items, this is known as ________ pricing.
A) dynamic
B) monopoly
C) predatory
D) beneficial

Question

Quizplus · Accepted Answer

This is an example of predatory pricing, where a firm deliberately sets prices below cost to drive out competition or deter entry of new competitors. The diversified firm may use profits from other businesses to sustain losses in the subsidized business while driving smaller competitors out of the market.

When Diversified Firms Use the Revenues from Profitable Businesses to Subsidize