Question

The practice of setting the selling price below cost with the intent to drive competitors out of business is: 28) A) target pricing. B) predatory pricing. C) peak-load pricing. D) target costing.

Answer 1

Answer:

The correct answer is letter "B": predatory pricing.

Explanation:

Predatory pricing refers to companies setting prices below the average level in an attempt to wipe out competition. In the beginning, consumers may benefit from the low prices but after the competition has disappeared, the predatory company raises the prices, but, in this scenario, consumers do not have substitutes from where to choose. The predatory company became a monopoly.

Predatory pricing practices are forbidden by the Federal Trade Commission (FTC) in the U.S.