A Penetration Pricing Policy Is Most Likely to Be Effective

question 216

Multiple Choice

A penetration pricing policy is most likely to be effective when which of these is true?

• 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) A low initial price discourages competitors from entering the market.
• D) Customers interpret the high price as signifying high quality.
• E) Enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.

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Definitions:

Expanded Accounting Equation

Assets = Liabilities + Capital – Withdrawals + Revenue – Expenses.

Owner's Equity

The residual interest in the assets of an entity after deducting liabilities, representing the ownership interest of the owners.

Ledger

A comprehensive collection of a company's accounts, where transactions are recorded in detail.

Account

A report or record that maintains the details of each financial transaction a company engages in.