Suppose Firm a Sets a Price Below Average Variable Cost

question 127

Multiple Choice

Suppose Firm A sets a price below average variable cost for two years.After the second year,Firm A's biggest rival goes bankrupt and exits the market.In the third year,Firm A raises prices significantly.Firm A is practicing

• A) average variable pricing.
• B) inversion pricing.
• C) competitive pricing.
• D) collusion pricing.
• E) predatory pricing.

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Definitions:

Employee Salaries and Wages

The payment made to employees for their services, either calculated hourly (wages) or over a fixed period (salaries).

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular period or category in financial management.

Customers Served

A metric indicating the number of customers a business has provided products or services to within a specific time period.

Total Expenses

The sum of all costs and expenses incurred by a business or individual in a given period.