The theory of limit pricing postulates that a firm in a strong market position sets prices that create profits which just fail to attract entrants

Question

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This is the basic idea behind limit pricing theory. A firm with a dominant market position may set prices just high enough to make it unprofitable for potential new entrants to compete with them, allowing them to maintain their market share and earn above-normal profits.

The Theory of Limit Pricing Postulates That a Firm in a Strong