A competitive strategy to set less than monopoly prices in an effort to deter entry by new competitors is called:
A)market penetration pricing.
B)limit pricing.
C)predatory pricing.
D)none of these.

Question

Quizplus · Accepted Answer

Limit pricing is a competitive strategy where a firm sets its prices lower than the monopoly price, but still high enough to make it unprofitable for any new entrants to enter the market. This is done to discourage new competitors from entering the market as they would not be able to cover their costs at the lower price level. Market penetration pricing is a pricing strategy where a firm sets low prices to attract customers and gain market share. Predatory pricing is a pricing strategy where a firm sets very low prices to drive competitors out of the market, which is illegal in many countries. The strategy described in the question is known as limit pricing, which involves setting a price just low enough to make it unprofitable for new competitors to enter the market. This is different from market penetration pricing, which involves setting low prices to attract new customers, and predatory pricing, which involves setting prices low with the intention of driving competitors out of business.

A Competitive Strategy to Set Less Than Monopoly Prices in an Effort