A penetration pricing policy is MOST LIKELY to be effective when A)lowering the price has only a minor effect on increasing sales volume and reducing unit costs. B)the high initial prices do not attract competitors. C)a low initial price discourages competitors from entering the market. D)customers interpret high price as signifying high quality. E)customers are willing to buy immediately at the high initial price.

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Quizplus · Accepted Answer

A penetration pricing policy is effective when a low initial price discourages competitors from entering the market. This allows the firm to establish its brand and gain a foothold in the market. Additionally, customers may be attracted to the lower price and choose the product over competitors. However, if lowering the price has only a minor effect on increasing sales volume and reducing unit costs, then a penetration pricing policy may not be effective. Similarly, if customers interpret high prices as signifying high quality or are willing to buy immediately at the high initial price, then a penetration pricing policy may not be the best option.

A Penetration Pricing Policy Is MOST LIKELY to Be Effective