A Penetration Pricing Policy Is Most Likely to Be Effective

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