Firms in industries characterized by increasing returns will use the objective of maximizing market share and a penetration pricing strategy.

Question

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Firms in industries with increasing returns to scale will face lower average costs as they sell more output, allowing them to charge lower prices and still make a profit. To achieve higher market share, they may use a penetration pricing strategy to enter the market and establish themselves before competitors, with the goal of capturing a larger slice of the market in the long run.

Firms in Industries Characterized by Increasing Returns Will Use the Objective