Question

Which of the following statement is true?

A. It is difficult to lower prices on an introductory product.
B. Price skimming allows competitors to easily enter the market.
C. Firms must consider the high costs associated with producing a small volume of product.
D. Price skimming does not work well with new-to-the-market, innovative products.
E. Price skimming is often challenged as being illegal.

Answer 1

C. Firms must consider the high costs associated with producing a small volume of product.

Step-by-step explanation:

Firms must always consider the high costs of producing at a lower volume and factor this in their budgets and pricing decisions.

All the other options are fall as Price skimming sets higher prices and makes entry difficult furthermore usually, introductory products are at a lower price to attract customers. This nullifies Option A and B.

Option D is nullified as innovative products usually commands higher prices called skimming.

Option E is conditional may be true in some cases but not always, higher prices simply discourage the demand without any legal action necessary most of the times.

Hope that helps.