Problem

How is intellectual property different from other…

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Problem 11 Hard Difficulty

What is predatory pricing?

Answer

Predatory pricing is a pricing strategy where the pricing is kept so low that it becomes very
difficult for other firms to compete and offer goods at similar price to be competitive. Companies
go for this strategy to wipe competition and become a monopoly.

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Principles of Microeconomics for AP® Courses

Chapter 9

Monopoly

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Okay, so the question here is to ask about this time of crisis so well, we know what is prince for pricing. Even. You know that in this chapter you're talking about So we're monopoly man we know about There's only one for me, the markets. And because there's only one sound in the market, this cellar has very strong market and with renewed by market, taller if the firm has some markets. Howard, to set a price, said, I wanted you to be sold in the market, and the aim is to maximized this product show. Basically, the benefits of a monopolist in the monopoly market is it has control over the marketed to surprise, said quantity and maximizes profit. But because of this can of high profit with that, we know that some new entrants like to enter. Want to answer Kiss did prefer this high profit and probably at the engine to market successfully because share his candle profit was to prove us monopolist night. And as a strategy to stop this kind of new entrance, the monopolised you prefers on Kendall strategy, Let's recall, is proud to sponsor. So what do you mean by products reprising that is, if monopolise see a new entrant like to enter into the market, then the monopolise sink way set very low costs to scare away, to scare away you. Thing about why there's a party. How old do you set? A very, very, very low price for the monopolise. The reason is it the new entrance marked intern to market your man it cost. It has two bits. For example, new entrants. I need you by Samuel Equipments that rearranging, building or something and need to hire the workers. And you two probably buy some new technology a lot of stuff, and that's all costs money. So we know that interest cost is very high for the new entrant. But first, a monopolist was driving a saying that Okay, at this competition period, I don't like to set a very low price. And this work doors on why I went to Satya Slow Christ is by Saturn very low price. That's why I will attract law consumers to buy my dues. And at the same time, if you let knew the new ancient what you compute with the existing monopolise, it's you me to set a low price because we know that consumers like you prefer a lower price. Good. Wait So but setting a lower price province. Ah, the last prophet for the monopolies but probably is a huge loss for the new entrant. So that scandal way to stop new entrants from entering the market. So even your entrance See that it's a human's lost because of this can of entering the market. Probably the new entry stuff, right? You entrained stop and have a result. No. Stay monopolise right from an office with a monopoly Current will stay the ma close up the markets and later on the firm can see WAY said higher clients. Great I am set belongs to sing, sing and connecting minds rates so gratis reprising you're simply can't process This process is the monopolist said in lower price, too sparely the new entrant and after you've entrance clear the way for those of us left high cost and no profit, then the firm in the markets. They hasn't enough list at market and if the firms they have the monopolizing, the market still has very strong market power on. Because of this candle market, power can set cries and quantity and so few maximizes profit. So that's a strategy you cannot strategy by monopolist in markets

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Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Microeconomics for AP® Courses

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Problem

How is intellectual property different from other…

Problem 11 Hard Difficulty

What is predatory pricing?

Answer

Predatory pricing is a pricing strategy where the pricing is kept so low that it becomes very
difficult for other firms to compete and offer goods at similar price to be competitive. Companies
go for this strategy to wipe competition and become a monopoly.

Related Courses

Principles of Microeconomics for AP® Courses

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Discussion

Top Educators

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Watch More Solved Questions in Chapter 9

Video Transcript

Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Microeconomics for AP® Courses

Predatory pricing is a pricing strategy where the pricing is kept so low that it becomes verydifficult for other firms to compete and offer goods at similar price to be competitive. Companiesgo for this strategy to wipe competition and become a monopoly.

Principles of Microeconomics for AP® Courses

Steven A. Greenlaw, David Shapiro, Timothy TaylorPrinciples of Microeconomics for AP® Courses

Predatory pricing is a pricing strategy where the pricing is kept so low that it becomes very
difficult for other firms to compete and offer goods at similar price to be competitive. Companies
go for this strategy to wipe competition and become a monopoly.

Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Microeconomics for AP® Courses