Penetration Pricing Means Charging a Relatively Low Price for a Product

question 120

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:

• A) tends to be more effective in a less price-sensitive market
• B) tempts competitors to enter the market
• C) provides a large profit per unit sold
• D) recoups product development costs quickly
• E) tends to lower production costs

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Definitions:

Commitment Fee

A charge levied by a lender on a borrower for an agreed loan commitment that has not yet been utilized.

Revolving Credit

A credit facility that allows a borrower to withdraw, repay, and redraw loans repeatedly up to a certain credit limit.

Take-Down

Take-down refers to the process of allocating and distributing securities to interested buyers in an underwriting arrangement.

Prompt Payment Discount

A discount offered to customers by suppliers as an incentive for early payment of their invoices within a specified period.