When a firm increases output and accepts a lower price to keep new firms from entering, it is engaging in

Question

Quizplus · Accepted Answer

This is an example of limit pricing, where a firm intentionally sets a lower price to discourage the entry of new firms to the market. This strategy helps the existing firm maintain its market power and avoid competition. This behavior is not legal and can result in antitrust violations. B, C, and D refer to illegal behavior where firms collude to fix prices or form a cartel to control the market, which is not what is happening in this scenario.

When a Firm Increases Output and Accepts a Lower Price