If a dominant firm follows a strategy of limit pricing, this firm charges a price _________ the current profit-maximizing level in order to _____________.
A)equal to; maximize profits.
B)below; reduce the rate of expansion by the fringe.
C)above; drive out the fringe.
D)below; limit dominant firm's marginal cost.

Question

Quizplus · Accepted Answer

Limit pricing is a strategy where a dominant firm sets the price lower than the profit-maximizing level to deter entry into the market or limit the expansion of fringe firms by making it less profitable or unprofitable for them to compete.

If a Dominant Firm Follows a Strategy of Limit Pricing