This question asks you to take into consideration some basic micro-economics. I hope they are still fresh in your memory! But the question is really on what pricing strategy should be followed when introducing a new product. This is a very important concept in pricing.

The situation is fairly easy: since we expect future competition, it is important to achieve a high market share very early on in the product life cycle. Also because demand is fairly elastic, the best way to achieve this is by offering a low price. In addition, since the company is a low-cost producer, this strategy makes sense. So we are talking about a penetration strategy, answer a).

21.    Which pricing policy is probably "best" for a profit-oriented, low-cost producer who is introducing a new product in a market with elastic demand and is expecting strong competition very soon after product introduction?

    a)    penetration pricing.

    b)    status-quo pricing.
    Status-quo pricing doesn't make sense when you introduce a product.

    c)    meeting competition pricing.
    There is no competition at this point, so who you're going to meet?

    d)    skimming pricing.
    This would have been good in the case of inelastic demand and when profit maximization is an issue.

    e)    introductory price dealing.
    Beware: this is not a pricing policy, but a tactic, which could be part of the penetration policy.