The Strategy of Setting a Low Initial Price to Attract

question 53

Multiple Choice

The strategy of setting a low initial price to attract a large number of buyers quickly and win a large market share is referred to as ________.

• A) market-skimming pricing
• B) market-penetration pricing
• C) value-added pricing
• D) target costing
• E) deceptive pricing

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Definitions:

Firm

A business organization, such as a corporation, partnership, or sole proprietorship, which is engaged in the production and distribution of goods or services.

Profit-Maximizing

The process or strategy of adjusting production and sale levels to achieve the highest possible profit with the given resources and market conditions.

MC = MR

This refers to the condition where a firm's marginal cost (MC) is equal to its marginal revenue (MR), often used to determine the profit-maximizing level of output in microeconomic theory.

Perfect Competitor

A theoretical market structure where many firms sell an identical product, entry and exit are easy, and no single firm can influence the market price.