A Skimming Pricing Policy Is Likely to Be Most Effective

question 344

Multiple Choice

A skimming pricing policy is likely to be most effective when (1) enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable; (2) __________; (3) lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost; and (4) customers interpret the high price as signifying high quality.

• A)the high initial price will not attract competitors
• B)consumers tend to be price-sensitive
• C)it will be easier to set measurable sales unit goals
• D)a lower price will significantly reduce unit costs
• E)consumers perceive your product to be similar to other products on the market

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Definitions:

Retention Ratio

The retention ratio is a financial metric that measures the proportion of a company's earnings that are not distributed as dividends to shareholders but are instead reinvested in the business.

Debt-equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by its shareholder's equity.

Growth Rate

Growth rate refers to the percentage increase in the size or value of something over a specific period.

Retains Earnings

Profits that a company chooses to re-invest in the business rather than distribute to shareholders.