Limit Pricing Refers to

question 49

Multiple Choice

Limit pricing refers to

• A)the highest price a monopolist can set.
• B)the highest price that just inflicts a loss on a potential entrant.
• C)a strategy used by entering firms in contestable markets.
• D)the lowest price a duopoly can set.
• E)none of the above.

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Definitions:

Average Variable Cost

The cost a company incurs for each unit of output, which changes with the level of production, excluding fixed costs.

ATC

Abbreviation for “Average Total Cost,” reflecting the total cost of production divided by the number of goods produced, in economic terms.

MC

Stands for Marginal Cost, which is the increase or decrease in the total cost that arises from producing one additional unit of a product.

Variable Cost

Expenses that vary directly with the volume of products or services a company generates.