If a Dominant Firm Follows a Strategy of Limit Pricing

question 60

Multiple Choice

If a dominant firm follows a strategy of limit pricing, this firm charges a price _________ the current profit-maximizing level in order to _____________.

• A)equal to; maximize profits.
• B)below; reduce the rate of expansion by the fringe.
• C)above; drive out the fringe.
• D)below; limit dominant firm's marginal cost.

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Definitions:

Long-Run Average Cost

The per-unit cost of production in the long term, where all inputs are variable.

Total Output

The total value of goods and services produced by an economy over a specific period of time.

Total-Cost Curve

A graphical representation showing the total cost of producing varying quantities of output.

Economic Profit

The surplus gained from undertaking an activity after accounting for both explicit and implicit costs, differing from accounting profit.