In a typical predatory-pricing scheme, the predator:
A) reflects changing conditions in the marketplace affecting the marketability of competitor's goods.
B) reduces the sale price of its product to below cost, hoping to drive competitors out of business.
C) does not aim to create monopoly.
D) furnishes customers with certain services that were not provided by the competitors.

Question

Quizplus · Accepted Answer

In a typical predatory-pricing scheme, the predator reduces the sale price of its product (its output) to below cost, hoping to drive competitors out of business. Then, with competition vanquished, the predator raises output prices to a supracompetitive level. For the scheme to make economic sense, the losses suffered from pricing goods below cost must be recouped (with interest) during the supracompetitive-pricing stage of the scheme.

In a Typical Predatory-Pricing Scheme, the Predator