Question

"One of the problems with price competition is that price decreases by one competitor are easily observed by other competitors. This can lead to rounds of successive price cuts, resulting in reduced profits for all competitors. This situation is called"
a. Loss-leader pricing
b. Product line pricing
c. Predatory pricing
d. Industry cannibalization

Answer 1

Answer:

The correct answer is letter "E": A price war.

Explanation:

A price war is a situation in which competitors undercut prices to offer their products at a lower level than their rivals so they can attract more consumers. Manufacturers find ways to cut their costs so they can stay profitable under these circumstances. If they are unable to do that, the company will end up with losses.