Predatory pricing involves a firm a. requiring that the firm reselling its product do so at...

Predatory pricing involves a firm

	a.	requiring that the firm reselling its product do so at a specified price.
	b.	temporarily cutting the price of its product to drive a competitor out of the market.
	c.	colluding with another firm to restrict output and raise prices.
	d.	selling two individual products together for a single price rather than selling each product individually at separate prices.

Expert Solution

The answer is C- Predatory pricing involves a firm colluding with another firm to restrict output and raise prices.

Predatory pricing, also known as undercutting, is a pricing strategy in which a product or service is set at a very low price with the intention to achieve new customers (Loss leader), or driving competitors out of the market or to create barriers to entry for potential new competitors.

Theoretically, if competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The so-called predatory merchant then theoretically has fewer competitors or even is a de facto monopoly.

Predatory pricing is considered anti-competitive in many jurisdictions and is illegal under some competition laws. However, it can be difficult to prove that prices dropped because of deliberate predatory pricing, rather than legitimate price competition. In any case, competitors may be driven out of the market before the case is ever heard.

Rahul Sunny answered 1 year ago

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