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Chapter 9: Q.11 (page 232)

What is predatory pricing?

Short Answer

Expert verified

Selling goods & services at lower price purposelyto drive other businesses out of the market.

Step by step solution

01

Step 1. Background

Monopoly is market structure in which there is only one seller selling a product with no close substitutes. Several tools such as predatory pricing are used by business to drive out comeptition.

02

Step 2. Concept

Predatory pricing refers to a pricing strategy in which a dominating company in an industry purposely sells its product at a very low price to eliminate competition.

Predatory pricing is considered to be an unethical activity as Dominating firms reduce their prices at a loss-making level for the long term benefits.

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