Firm A prices its products so low that it drives competitors out of the market.After all of its competitors have been driven out of the market,Firm A raises prices significantly.The fact that Firm A ________ is sufficient evidence of anticompetitive behavior.
A) lowered prices
B) raised prices significantly
C) drove competitors out of the market
D) competed with other firms on price
E) lowered its price below average variable cost in an effort to drive competitors out of the market and then subsequently increased price

Question

Quizplus · Accepted Answer

Firm A's strategy of lowering its price below average variable cost in an effort to drive competitors out of the market and then subsequently increasing the price is known as predation. This is a type of anticompetitive behavior that can harm consumers by reducing competition and allowing the predator firm to charge higher prices once it has eliminated its rivals. Therefore, the fact that Firm A engaged in this strategy is sufficient evidence of anticompetitive behavior.

Firm a Prices Its Products So Low That It Drives