Question

What is predatory pricing?

Short answer

Selling goods & services at lower price purposelyto drive other businesses out of the market.

Step-by-step solution

Step 1. Background

Monopoly is market structure in which there is only one seller selling a product with no close substitutes. Several tools such as predatory pricing are used by business to drive out comeptition.

Step 2. Concept

Predatory pricing refers to a pricing strategy in which a dominating company in an industry purposely sells its product at a very low price to eliminate competition.

Predatory pricing is considered to be an unethical activity as Dominating firms reduce their prices at a loss-making level for the long term benefits.