Market Skimming Pricing Makes Sense Under All the Following Conditions

question 125

Multiple Choice

Market skimming pricing makes sense under all the following conditions, EXCEPT if ________.

• A) a sufficient number of buyers have a high current demand
• B) the unit costs of producing a small volume are high enough to cancel the advantage of charging what the traffic will bear
• C) the high initial price does not attract more competitors to the market
• D) consumers are likely to delay buying the product until its price drops
• E) the high price communicates the image of a superior product

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Definitions:

Marginal Tax Rates

The rate at which an additional dollar of income is taxed, showing the percentage of tax applied to your income for each tax bracket you pass through.

Laffer Curve

A theoretical representation of the relationship between tax rates and government revenue, suggesting there is an optimal tax rate that maximizes revenue.

Tax Revenue

The financial earnings that governments obtain through taxation.

Price Ceiling

A legally imposed limit on the price that can be charged for a good or service.