Coolaire is the only firm producing refrigerators. It costs $950 to produce a refrigerator, and Coolaire sells each refrigerator for $1,200. After Chillbox, a new firm with the same costs as Coolaire, enters the market for refrigerators, Coolaire starts selling its refrigerators for a price of $600. gWhat is the most likely reason for coolaire's price cut? a.) coolaire is engaged in predatory pricing b.) coolaire is engaged in resale price maintenance.

Question

Danielle

Business

1 January, 22:25

Coolaire is the only firm producing refrigerators. It costs $950 to produce a refrigerator, and Coolaire sells each refrigerator for $1,200. After Chillbox, a new firm with the same costs as Coolaire, enters the market for refrigerators, Coolaire starts selling its refrigerators for a price of $600. gWhat is the most likely reason for coolaire's price cut? a.) coolaire is engaged in predatory pricing b.) coolaire is engaged in resale price maintenance.

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Answers (1)

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Dereon Stout · Answer 1

a.) coolaire is engaged in predatory pricing

Explanation:

Predatory pricing is setting the price of a good or service very low with the motive of sending competitors out of the market or preventing new competitors from entering the market or gaining new customers.

Coolaire cuts its price below its cost of production when Chillbox entered the market most likely with the intent to chase Chillbox out of the market. This is predatory pricing.