For our purpose, we should note that the limit price is the maximum price that can
be set by an incumbent firm (or firms acting together) without attracting new entrants
into the market. In the market illustrated in Figure 8.1 (earlier), entry will not occur
because the prevailing price of PL is lower than the long-run average cost (LRAC) of the
potential new entrant and therefore entry is not profitable for the potential new entrant.