Another question from Chapter 17, on pricing policies. This means that you should really know what penetration and skimming pricing policies mean...

24.    A «penetration pricing policy»:

    a)    involves a series of step-by-step price reductions along an inelastic demand curve.
That would more likely be in the case of a skimming pricing policy.

    b)    may be wise if a firm expects strong competition very soon after its product introduction.
True, this is the correct answer. The idea of penetration is to achieve a high market share as soon as possible, so that when competitors enter the market, a loyal customer base already exists.

    c)   involves temporary price cuts to speed new products into market.
Temporary price cuts are temporary price cuts. They are not necessarily related to penetration pricing.

    d)    is the same as a «meeting competition» price-level policy.
If the product is new to the market, there is no competition, so there is no meeting the competiton. If it is not new, penetration policy is more likely to have a lower price than competition.

    e)    is wise when demand is fairly inelastic, offering an «elite» market.
Again, this is the case for a skimming pricing policy.