Which of the following pricing strategies does NOT usually enhance the profits of firms with market power?
A) Price matching
B) Cross-subsidies
C) Two-part pricing
D) Marginal cost pricing

Question

Quizplus · Accepted Answer

Marginal cost pricing involves setting prices equal to the marginal cost of producing the product, which leads to no mark-up and zero profits. Firms with market power, who have the ability to set prices higher than marginal cost, would not want to use this strategy as it would actually decrease their profits. In contrast, price matching, cross-subsidies, and two-part pricing all have the potential to enhance the profits of firms with market power.

Which of the Following Pricing Strategies Does NOT Usually Enhance