Question

consider a market served by a monopolist, firm a. a new firm, firm b, enters the market and, as a result, firm a lowers its price to try to drive firm b out of the market. this practice is known as a. tying. b. predatory tying. c. resale price maintenance. d. predatory pricing.

Answer 1

This practice of lowering its price to driving a firm out is known as Predatory pricing.

• A dominant company will frequently use predatory pricing as a deliberate strategy to drive out rivals by setting exceptionally cheap prices or supplying items for less than the company would otherwise have to spend on manufacture
• Predatory pricing is a pricing strategy where a dominating corporation in an industry would intentionally lower the prices of a product or service to loss-making levels in the short-term. This is undercutting on a wider scale.
• A pricing strategy known as "predatory pricing," which is commonly used in marketing, is one in which items or services are offered at exceptionally low costs with the purpose of removing rivals and increasing barriers to entry.

Thus the answer is Option D.

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