Question

a boat company is competing in a boat market with boats. the company drops its price...

a boat company is competing in a boat market with boats. the company drops its price below its cost and in doing so drives the boat company out of the market. once the other company is a monopoly, they reside their price and gain economic profit. this is an example of....

predatory pricing
resale price maintenance
output restrictions
Market decision

Business   Economics   
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Answer #1

This is a clear example of predatory pricing

Predatory pricing is the act of setting market prices so low that the other competitors in the market are not able to sustain the competition and are driven out of the market. Hence in this way the firm undertaking this pricing will drive all major competitors out of the market and will try becoming a monopoly. Once it has control of the whole market,it will start charging higher prices and start gainibg profit out of it.

In this scenario, the boat company has attempted to do the same.

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