Multiple Choice
Who typically sets price controls, such as price ceilings and price floors, in a market economy?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Price Ceilings, Price Floors, and Black Markets
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which pricing strategy is described by setting prices low until after a reliable customer base is established, then raising prices?
A
Price discrimination
B
Penetration pricing
C
Black market pricing
D
Price ceiling
Verified step by step guidance1
Understand the concept of penetration pricing: it involves setting a low initial price to attract customers and build market share quickly.
Recognize that after establishing a reliable customer base, the firm may raise prices to increase profitability once customers are less price-sensitive.
Compare this strategy with other options: price discrimination involves charging different prices to different groups, black market pricing refers to illegal or unofficial pricing, and price ceiling is a government-imposed maximum price.
Identify that the strategy described matches penetration pricing because it focuses on low initial prices followed by price increases after customer loyalty is gained.
Conclude that the correct pricing strategy described is penetration pricing.
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