A Penetration Strategy Tends to Be Effective in a Price-Sensitive

question 48

Multiple Choice

A penetration strategy tends to be effective in a price-sensitive market. What is one of the purposes of penetration pricing?

• A)to recoup product development costs quickly
• B)to discourage competitors from entering the market
• C)to produce a large margin of profit per unit
• D)to develop exclusive distribution

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Definitions:

Security Market Line

A line that represents the relationship between the expected return of a security and its systematic risk, illustrating the risk-return trade-off in the capital asset pricing model (CAPM).

Portfolio Weight

The proportion of a specific asset within an investment portfolio relative to the total asset value of the portfolio.

Beta

A measure of a stock's volatility in comparison to the overall market, indicating its relative risk.