Several Factors Indicate That a Penetration Pricing Policy Would Be

question 78

Multiple Choice

Several factors indicate that a penetration pricing policy would be effective when introducing a new product, including situations in which

• A) lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.
• B) the high initial price will not attract competitors.
• C) customers interpret the high price as signifying high quality.
• D) enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.
• E) many segments of the market are price-sensitive.

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Definitions:

Expected Percentage Change

An estimation of the degree to which a specific variable such as price, cost, or investment value is anticipated to vary over a certain period.

Interest Rates

The percentage of a loan that is applied as interest for the borrower, usually shown as an annual percentage of the remaining loan amount.

Uncovered Interest Parity

A theory in economics that posits the difference in interest rates across two countries will match the anticipated shift in exchange rates between their currencies.

Interest Rate Parity

A theory stating that the difference between the interest rates of two countries is equal to the differential between the forward exchange rate and the spot exchange rate of their currencies.