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)resale price maintenance.
B)predatory tying.
C)tying.
D)predatory pricing.

Question

Quizplus · Accepted Answer

Predatory pricing occurs when a firm sets prices below cost with the intent to drive competitors out of the market. In this scenario, Firm A lowers its price in response to Firm B's entry, aiming to eliminate the competition, which is a classic example of predatory pricing.

Consider a Market Served by a Monopolist, Firm A