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Suppose there are two firms operating on a certain market, Firm A and Firm B. Firm A has a lower production cost than Firm B.
Suppose there are two firms operating on a certain market, Firm A and Firm B. Firm A has a lower production cost than Firm B. If Firm A uses predatory pricing to drive Firm B out of the market, what is the price range that Firm A should charge? Suppose Firm A drives Firm B to bankruptcy, can Firm A charge the monopoly price? (Hint: What happens to the assets of the bankrupt firm? Does the industry have a barrier to entry?)
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