The strategy of establishing a price that prevents the entry of new firms is called
A) cartel pricing.
B) limit pricing.
C) price leadership.
D) profit maximizing price.

Question

Quizplus · Accepted Answer

Limit pricing is the strategy of setting a price low enough to prevent the entry of new firms into the market. This is done with the intention of maintaining the firm's dominant position in the market and avoiding competition. Cartel pricing involves collusion among firms to fix prices, while price leadership involves one firm setting prices that are then followed by other firms in the market. Profit maximizing price is the price that a firm sets where it can maximize its profits, but it does not necessarily prevent the entry of new firms into the market.

The Strategy of Establishing a Price That Prevents the Entry