Which of the following scenarios is an example of predatory pricing?
A) Ceramic Corp sells its products below average total costs during off-peak seasons.
B) Almeida flowers has arrived at an informal agreement with other sellers in the area to charge a very high selling price.
C) Anton Inc., sells its products for $25 in the U.S, however it can sell the same product for double the price in its home country.
D) Duyen Inc., is launching a new product and has decided to sell its product below its average variable costs until it drives competitors out of market.

Question

Quizplus · Accepted Answer

Predatory pricing is a strategy used by dominant companies to drive out competition by temporarily setting a low price for a product, usually below the average variable cost, in order to drive out competitors from the market. Duyen Inc. is launching a new product and has decided to sell its product below its average variable costs until it drives competitors out of market, which is an example of predatory pricing. Options A, B, and C are not examples of predatory pricing.

Which of the Following Scenarios Is an Example of Predatory