Predatory pricing is illegal primarily because

• A. It drives most competition out of business and leaves the market in the control of only a few companies
• B. It is an unfair method of competition
• C. It inhibits free trade
• D. It benefits consumers

Answer: (C)

Predatory pricing is illegal mainly because it uses an unfair method of competition. When a dominant firm slashes prices well below cost to drive rivals out of the market, it isn’t competing on efficiency or value; it’s coercing competitors through price to achieve monopoly power. Once competitors are eliminated, the firm can raise prices and reduce choice, harming consumers and overall market welfare in the long run. Competition laws aim to keep markets fair and dynamic, so tactics that distort rivalry, like predatory pricing, are prohibited.

The other ideas don’t fit as the primary reason. It’s not primarily about preventing free trade across borders, since predatory pricing targets behavior within a market, not trade policy. And although consumers might see lower prices temporarily, the long-term effect undermines competition and can lead to higher prices, not a lasting consumer benefit.