Limit Pricing Is

question 66

Multiple Choice

Limit pricing is

• A)a strategy where a firm temporarily prices below its marginal costs to drive competitors out of the market.
• B)a strategy used by a vertically integrated firm to raise rival's costs of inputs, while holding constant final product prices.
• C)when an incumbent maintains a price below the monopoly price in order to prevent entry.
• D)the act of charging a low price initially upon entering a market to gain market share.

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Definitions:

Direct Method

A way of preparing a cash flow statement where actual cash receipts and payments are reported, rather than adjusting net income for accruals.

Reciprocal Method

An accounting technique used in managerial accounting to allocate costs between support departments, taking into account the mutual services they provide to each other.

Sequential Method

An approach to cost allocation in which support department costs are allocated to other support and operating departments sequentially, one after another, based on a predetermined order.

Reciprocal Services

Services exchanged between departments within an organization, used in cost accounting to allocate service department costs to producing departments.