Oligopolists may charge a price lower than the profit maximizing price to discourage new firms from entering a market.

Question

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This strategy is known as "limit pricing." By setting a price lower than the profit maximizing price, oligopolists can make it less attractive for new firms to enter the market. It can also help the oligopolists maintain their market share and reduce the risk of price wars with other firms in the industry.

Oligopolists May Charge a Price Lower Than the Profit Maximizing