Limit pricing is:

A. a strategy whereby a firm temporarily prices below its marginal costs to drive competitors out of the market.
B. a strategy whereby an incumbent maintains a price below the monopoly price in order to prevent entry.
C. the act of charging a low price initially upon entering a market to gain market share.

Please see the complete question below.

Limit pricing is:

A. a strategy whereby a firm temporarily prices below its marginal costs to drive competitors out of the market.

B. a strategy whereby an incumbent maintains a price below the monopoly price in order to prevent entry.

C. the act of charging a low price initially upon entering a market to gain market share.

D. the act of charging a low price initially upon entering a market to gain market share.

The answer is option (B) a strategy whereby an incumbent maintains a price below the monopoly price in order to prevent entry.

Explanation:

Limit pricing is a strategic means which suppliers use to ward off competition. They achieve this by selling products at a very low price that discourages potential suppliers from supplying such products because the pricing system looks unprofitable.

The strategy which is deemed illegal in many countries is used by monopolists who are already in the market. Thus they are also known as incumbents.

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