A firm introduces a totally new product.Knowing that it must bring in revenues to cover the costs of developing and promoting this new product,the firm decides to sell the product at a very high price.This practice is referred to as ________.
A) penetration pricing
B) introductory pricing
C) price skimming
D) price lining

Question

Quizplus · Accepted Answer

Price skimming is the practice of setting a high price for a new product to cover the costs of development and promotion. The goal of price skimming is to maximize profits in the short term before competitors enter the market and drive down the price. Penetration pricing, on the other hand, involves setting a low price to attract customers and gain market share. Introductory pricing refers to temporary price reductions used to promote a new product, and price lining involves offering a range of products at different price points.

A Firm Introduces a Totally New Product