Which of the following is most likely to be a reason for a firm to price a product above competition?
A) The firm is selling a homogenous product.
B) Demand for the product is price elastic.
C) The firm is a price leader in the industry.
D) This approach represents the collective wisdom of the industry.

Question

Quizplus · Accepted Answer

A firm may price above competition because it has a superior product or because the firm is the price leader in the industry. Pricing a product at competition is called going-rate pricing and is popular for homogeneous products, since this approach represents the collective wisdom of the industry and is not disruptive of industry harmony. A penetration policy is one in which the seller charges a relatively low price on a new product. Generally, this policy is used when the firm expects competition to move in rapidly and when demand for the product is, at least in the short run, price elastic.

Which of the Following Is Most Likely to Be a Reason