Final answer:
Penetration pricing is a pricing technique used to establish larger initial sales quantities by offering a very low price in order to decrease competition and increase product attractiveness. The correct answer is option 5).
Step-by-step explanation:
Penetration pricing is a pricing technique used to establish larger initial sales quantities by offering a very low price in order to decrease competition and increase product attractiveness. For example, a new smartphone company may introduce its product at a significantly lower price than its competitors to gain market share and encourage customers to switch from their current brand.
The aim is to attract customers with the low price and then gradually increase prices once market share has been gained. Penetration pricing is often used in industries with high competition and price-sensitive customers. It can be an effective strategy to quickly gain market share and establish a strong customer base.