Limit Pricing

Limit Pricing isn't a barrier per se, but it is a behavior that is intended to forestall entry. The reason it isn't exactly a barrier is that it doesn't depend on any specific characteristics of the firm or industry.    

    The firm whose data are shown to the right is maximizing profit and has no excess capacity. Profits are very large and so entry will be tempting. If this firm chooses to reduce price in order to discourage entry can it do so, and if so what is the minimal price it could charge?

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