Question

When diversified firms use the revenues from profitable businesses to subsidize the operations of another business and then set the prices of the subsidized firm's products at a level that is below the subsidized business's cost to produce these items, this is known as ________ pricing.

Answer 1

Predatory.

Step-by-step explanation:

This predatory pricing strategy is used when a company aims to create entry barriers for new competitors, significantly lower the price to gain new customers and drive competitors away. The cons of this strategy is that in addition to being illegal, lost revenue is not always recovered, and there are other factors that drive competitors away, not just price.