An Incumbent Firm Uses Limit Pricing

question 47

Multiple Choice

An incumbent firm uses limit pricing

• A)to set price below a potential rival's marginal cost, thus making entry unprofitable.
• B)to set one price for a quantity of a good below a certain limit, and a second price for purchases above the limit.
• C)when it has no other advantages over a potential rival.
• D)if it is limited in the quantity of inputs it can purchase to produce output.

---

Definitions:

Innocent

The state of being not guilty of a crime or other wrong act.

Negotiation

The process by which two or more parties engage in discussions to reach a mutually agreed-upon outcome.

Indorsee

A person to whom a negotiable instrument is transferred by indorsement.

Payable

Financial obligations or monies that are due to be paid to creditors or suppliers.