The practice of setting prices below average variable cost and with accompanying plans to raise prices later to recover the losses from the lower prices is referred to as:
A) Marginal cost pricing.
B) Activity-based pricing.
C) Menu-based pricing.
D) Cost-plus pricing.
E) Predatory pricing.

Question

Quizplus · Accepted Answer

The given scenario describes predatory pricing, which involves setting prices below the cost of production to drive competitors out of the market and gain a monopoly. The predator (the company offering lower prices) intends to increase prices once it eliminates rivals and gains power in the market. This practice is illegal in many countries, including the USA, EU, and India, as it violates antitrust laws that promote fair competition.

The Practice of Setting Prices Below Average Variable Cost and with Accompanying