Penetration Pricing Means Charging a Relatively Low Price for a Product

question 40

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,which of the following BEST describes penetration pricing in this case?

• A) It tends to lower production costs.
• B) It recoups product development costs quickly.
• C) It tempts competitors to enter the market.
• D) It provides a large profit per unit sold.

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Definitions:

Cash Assets

Resources in the form of currency or other items that can be easily converted to cash.

Cost Method

An investment accounting method where the investment is recorded at its acquisition cost, and income is recognized only when dividends are received.

Treasury Stock

Shares that were once a part of the outstanding shares of a company but were bought back and are held by the company itself.

Cost Method

An accounting method used to value inventory or investments at their original cost.