Question

When a firm prices its goods below the marginal cost to drive away competitors, it is...

  1. When a firm prices its goods below the marginal cost to drive away competitors, it is referred as

    price skimming.

    limit pricing.

    penetration pricing.

    predatory pricing.
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Answer #1

The predatory pricing can be defined as the pricing strategy in which firm's set price at a lowest level, so that small firms could be driven out of the market. So in this way competition decrease and existing firm's can behave like a monopoly firm. Price can go below MC for this strategy.

Hence it can be said that when a firm prices its goods below the marginal cost to drive away competitors, it is referred as predatory pricing.

Hence option fourth is the correct answer.

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