Question 1

Market-skimming is a more popular strategy for pricing new products,while market-penetration is a more popular strategy for pricing products that are more advanced in the product life-cycle.

Accepted Answer

The statement is the opposite of reality. Market-skimming is a more popular strategy for pricing products that are more advanced in the product life-cycle, while market-penetration is a more popular strategy for pricing new products.

Question 2

Market-skimming pricing is practiced by companies that set a low initial price in order to get their 'foot in the door' quickly and deeply,attract a large number of buyers quickly and win a large market share.

Accepted Answer

Market-skimming pricing is actually the opposite - setting a high initial price to capitalize on the willingness of some consumers to pay a premium for a new or unique product, then gradually lowering the price to attract more price-sensitive consumers.

Question 3

Which of the following would NOT support a market-skimming policy for a new product?

Accepted Answer

A market-skimming policy involves charging a high price for a new product to maximize profits from early adopters. However, if competitors can enter the market easily, they may offer similar products at lower prices, negating the advantage of a higher price for the new product. Thus, if competitors can easily undercut the high price, it would not support a market-skimming policy.

Question 4

Under ________ competition,the market consists of many buyers and sellers who trade over a range of prices,rather than a single market price.

Accepted Answer

The answer of Under ________ competition,the market consists of many...

Question 5

A firm is using ________ when it charges a high,premium price for a new product with the intention of reducing the price in the future.

Accepted Answer

Price skimming strategy involves setting a high initial price for a new product to attract early adopters who are willing to pay a premium price. The firm then gradually reduces the price to appeal to a wider market. This strategy is often used for high-tech products, where early adopters are willing to pay a higher price for the latest technology. Therefore, option A) price skimming is the most appropriate answer.

Question 6

Under ________ competition,the market consists of many buyers and sellers trading in a uniform commodity.

Accepted Answer

The answer of Under ________ competition,the market consists of many...

Question 7

Under pure competition,the market consists of one or a few buyers and sellers.

Accepted Answer

Under pure competition, the market consists of a large number of buyers and sellers, not just one or a few. This is one of the defining characteristics of pure competition.

Question 8

If demand changes greatly with a small change in product price,the demand is inelastic.

Accepted Answer

If demand changes greatly with a small change in product price, the demand is elastic, not inelastic. Inelastic demand means that changes in price have little effect on the quantity demanded.

Question 9

Johnson Boats wants to introduce a new model of boat into mature markets in highly developed countries with the goal of quickly gaining mass-market share.As a consultant,you should recommend a ________ pricing strategy.

Accepted Answer

The most appropriate pricing strategy in this case is market-penetration, which involves offering low prices to quickly gain market share. This is particularly effective when entering a mature market as it enables the company to quickly establish itself and compete with existing brands. Additionally, it can help create brand loyalty and reduce the likelihood of customers switching to competitors.

Question 10

A(n)________ curve shows the number of units the market will buy in a given time period at different prices.

Accepted Answer

The answer of A(n)________ curve shows the number of units...

Question 11

The demand curve shows the number of units the market will buy in a given time period at different prices that might be charged.In normal cases,the higher the price,the higher the demand.

Accepted Answer

In normal cases, the higher the price, the lower the demand according to the law of demand.

Question 12

Price ________ indicates how responsive demand will be to a change in price.

Accepted Answer

The answer of Price ________ indicates how responsive demand will...

Question 13

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________.

Accepted Answer

Market-skimming pricing involves setting a high price for a new product in order to recover costs quickly and generate high profits. This strategy is appropriate for products with unique features or perceived value, and for companies that have invested heavily in research and development. Market-penetration pricing, on the other hand, involves setting a low price to gain market share quickly and discourage new competitors. This strategy works well for products that are highly price-sensitive and where the company has a cost advantage over competitors. Market-level pricing, market-competitive pricing, and market-price lining are not commonly used pricing strategies. Market-price filling is not a recognized pricing strategy.

Question 14

Market-skimming pricing would likely be most effective in selling ________.

Accepted Answer

Market-skimming pricing is a pricing strategy in which a high price is set for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price. This strategy is most effective in selling an electronic device for which research and development must be recouped because these products typically have high development costs that need to be recovered, and also because they appeal to early adopter segments who are usually willing to pay a premium price for new and innovative products.

Question 15

All of the following conditions support market-penetration pricing EXCEPT which one?

Accepted Answer

Market-penetration pricing typically involves setting a low price to gain market share quickly, and the other conditions listed all support this strategy. However, if the product's quality and image do not support the low price, it may actually harm the brand and reduce the effectiveness of market-penetration pricing. Therefore, option C is the exception.

Question 16

Under ________ competition,the market consists of a few sellers who are highly sensitive to each other's pricing strategies.

Accepted Answer

The answer of Under ________ competition,the market consists of a...

Question 17

In a pure monopoly,the market consists of one seller.

Accepted Answer

In a pure monopoly, there is only one seller in the market, which is why it is referred to as a monopoly.

Question 18

When Pepsi came out with Pepsi Blue and priced it at half price to attract buyers,Pepsi was using ________.

Accepted Answer

Market-penetration pricing is a strategy where a company sets low prices to penetrate the market quickly and attract a large number of buyers. By pricing Pepsi Blue at half price, Pepsi aimed to attract more customers and penetrate the market quickly.

Question 19

All of the following conditions support marketing skimming pricing EXCEPT which one?

Accepted Answer

The given condition which does not support marketing skimming pricing is "Production and distribution costs should decrease with any increase in sales volume". However, all other given conditions support skimming pricing.

Question 20

________ pricing is the approach of setting a low initial price in order to attract a large number of buyers quickly and win a large market share.

Accepted Answer

The approach of setting a low initial price in order to attract a large number of buyers quickly and win a large market share is known as market-penetration pricing. This is often used when a company is entering a new market or introducing a new product, and wants to quickly establish itself and gain a foothold in the market. This strategy can help to generate buzz and excitement around the product, and can also help to discourage potential competitors from entering the market.

Quiz 9: Pricing: Capturing Customer Value