Which of the Following Is True of Price Skimming

question 59

Multiple Choice

Which of the following is true of price skimming?

• A) It is effective in situations in which competitors are able to undercut prices easily.
• B) It can be profitably used when the product's quality and image support its price.
• C) It involves underpricing products so that companies make larger sales.
• D) It is ineffective in situations in which competitors are unable to enter the market easily.
• E) It leads to a situation in which the company makes more, though less profitable, sales.

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Definitions:

Returns to Scale

Describes how a firm's output changes as inputs are increased proportionately.

Decreasing

A process or trend of becoming smaller or less in amount, size, degree, or value.

Lagrange Multipliers

A method used in optimization to find the maximum or minimum of a function subject to constraints.

Marginal Cost of Production

Another term for Marginal Cost, emphasizing the specific focus on production expenses.