Final answer:
The statement is true as penetration pricing entails setting the product's price lower than its market value, which can sometimes result in selling at a loss to increase market share and attract customers.
Step-by-step explanation:
Penetration prices often mean that the product may be sold at a loss for a certain period of time. The statement is true. Penetration pricing is a marketing strategy where a product is priced lower than its market value to attract customers and gain market share. This approach can sometimes mean selling the product at a loss initially. However, it is expected that the loss will be offset by increased volume in sales or the retention of consumers who will purchase other profitable goods or services. It is a risky strategy because if the price set does not lead to the expected increase in sales volume, or if the increased volume fails to compensate for the lower pricing, a firm can encounter significant financial losses. Furthermore, if imports are brought into the market at extremely low prices, domestic firms may feel pressured to match or even undercut these prices to remain competitive, which can lead to them selling at a loss. Having to compete with low-priced imports can put domestic firms in a precarious position, possibly driving them out of business over time as sustained losses are not feasible.