Arguments by regulators are often made that predatory pricing, with its attendant temporary price-cutting below costs, is an attempt to eliminate rivals with the intent of raising prices after the competition has left

Critically evaluate this argument.


First of all price cutting below costs will not only exact losses on the competition but also on the firm that practices this strategy. Second, even if the firm is successful in eliminating its rivals and raises prices after their departure that is no guarantee that new arrivals will be kept at bay especially when the remaining firms in the industry resume earning economic profit.

Economics

You might also like to view...

Suppose there are only two goods (bread and wine) and only two countries (England and Portugal). In England, the cost of producing 1 bottle of wine is 4 loaves of bread. What is the cost of producing 1 loaf of bread in England? Under what circumstances will England specialize in bread production and purchase its wine from Portugal? Explain.

What will be an ideal response?

Economics

Exempting food purchases from sales tax is consistent with the ability-to-pay principle, although not necessarily consistent with vertical equity

Indicate whether the statement is true or false

Economics

Which of the following barometric indicators would be the most helpful for forecasting future sales for an industry?

a. lagging economic indicators. b. leading economic indicators. c. coincident economic indicators. d. wishful thinking e. none of the above

Economics

If the fiscal policy makers aim to increase aggregate demand, they will likely enact:

A. expansionary fiscal policy. B. contractionary fiscal policy. C. expansionary monetary policy. D. contractionary monetary policy.

Economics