A Penetration Pricing Policy Is Most Likely to Be Effective

question 101

Multiple Choice

A penetration pricing policy is most likely to be effective when (1) __________; (2) a low initial price discourages competitors from entering the market; and (3) unit production and marketing costs fall dramatically as production volumes increase.

• 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:

Act of State Doctrine

A principle in international law that exempts a nation from being sued in another nation's courts for acts performed by it in the exercise of its sovereign authority.

Sovereign Immunity

The legal doctrine that a sovereign or state cannot commit a legal wrong and is immune from civil suit or criminal prosecution.

Agricultural Cooperatives Exemption

A legal provision that allows agricultural cooperatives to operate under specific regulatory exceptions, often for tax purposes.

Capper-Volstead Act

A U.S. federal law that grants farmers the ability to create agricultural cooperatives without risking antitrust law sanctions.