Predatory pricing occurs when a large company sets a price for its products below their cost of production, with the intention of driving smaller firms out of business. Once these smaller firms have gone out of business, the large company can increase its prices and monopolize the market.

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Predatory Pricing

Question 5

Multiple Choice

Predatory pricing:

A) occurs when a large company sets price below cost to drive smaller firms out of business.
B) is the practice of selling the same good at different prices to different consumers.
C) means setting a very high price for a product to signal high product quality.
D) occurs when firms in a market collude to set a high price for the product.
E) occurs when a firm extracts price reductions from its suppliers.

Correct Answer: