Question

In __________ pricing, the price of goods and services is limited to levels that tend to discourage new entry to markets. Multiple Choice per se variable exemption congestion limit

Answer 1

In Limiting pricing, the price of goods and services is limited to levels that tend to discourage new entry into markets.

What is LImiting Pricing?

• A monopolist may utilize limiting pricing to deter entrants. If a monopolist sets a profit-maximizing price (MR=MC), the level of supernormal profit is so high that it attracts new enterprises into the market.
• Limiting pricing entails lowering the price enough to discourage entry. It results in lower short-term profit, but it allows the corporation to maintain its dominant position and long-term profitability.
• As a result, rather than encouraging new firms to participate, the monopolist may decide to establish a price that is lower than the profit-maximizing level, but yet high enough to allow it to make more profits than in a competitive market.

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