Crimpson Corp., a California-based company is selling its products for $21. Its average variable costs is $23 and the average selling price of its competitors is $26. This is an example of ________.

Question

Quizplus · Accepted Answer

The scenario describes predatory pricing, which is when a company sets its prices intentionally lower than its competitors, with the aim of driving them out of business. Despite selling its products at a loss ($2 less than variable costs), Crimpson Corp. hopes to gain market share and eventually raise prices once competitors have been eliminated.