A company might use penetration pricing when it:
A) perceives demand for a new product to be price inelastic.
B) wants to charge a relatively high price on a new product.
C) expects competition to move in rapidly.
D) has a temporary monopoly in the market.

Question

Quizplus · Accepted Answer

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. A skimming policy is one in which the seller charges a relatively high price on a new product. Generally, this policy is used when the firm has a temporary monopoly and when demand for the product is price inelastic.

A Company Might Use Penetration Pricing When It