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.