Question

predatory pricing occurs when firms deliberately set their prices with the intent of driving rivals from the market. choose one: a. above average total costs b. above average variable costs c. below average variable costs d. below average total costs

Answer 1

Predatory pricing occurs when firms deliberately set their prices below average variable costs with the intent of driving rivals from the market.

• Predatory pricing occurs when firms deliberately set their prices with the intent of driving rivals from the market.
• The commonly proposed rule to determine if pricing is predatory is if a firm is selling for less than its average variable cost (i.e., the cost to produce an additional unit of output), which indicates that the firm should be shutting down at that price.
• Therefore, the correct answer is c. below average variable costs.