Penetration Pricing Means Charging a Relatively Low Price for a Product

question 59

Multiple Choice

Penetration pricing means charging a relatively low price for a product as a way to reach the mass market. The low price is designed to capture a large share of a substantial market. Thus, penetration pricing tends to do which of the following?

• A)to be more effective in a less price-sensitive market
• B)to tempt competitors to enter the market
• C)to recoup product development costs quickly
• D)to lower production costs

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Definitions:

Discount on Bonds Payable

An amount by which a bond is sold below its face value, reflecting the difference between the market rate of interest and the bond's coupon rate.

Market Volatile

A description of how significantly and frequently the price of assets, securities, or commodities can change in a market.

Bonds Mature

The point in time when a bond's principal amount is due to be paid back to bondholders, ending the bond's life.

Straight-Line Method

The straight-line method is a depreciation technique that allocates an even amount of depreciation expense over the useful life of an asset.