Which of the following is false regarding the practice of limit pricing by a dominant firm?
A)Limit pricing is a strategy to keep price below the level that maximizes profit to reduce the number of firms entering the fringe.
B)Limit pricing is a strategy that sacrifices current profits to maintain higher future profits.
C)Limit pricing is most appealing when the dominant firm has a cost advantage over the fringe firms.
D)Limit pricing is most attractive to a dominant firm that is more interested in current profits than future profits.

Question

Quizplus · Accepted Answer

Option D is false because limit pricing is a strategy that sacrifices current profits to maintain higher future profits. A dominant firm might limit price to discourage new firms from entering the market, reducing the competition and gaining a better position in the future, and thus, current profit is not the main objective. The statement "Limit pricing is most attractive to a dominant firm that is more interested in current profits than future profits" is false. In fact, limit pricing is a strategy that sacrifices current profits in order to deter potential competitors and maintain higher future profits.

Which of the Following Is False Regarding the Practice of Limit