Final answer:
When a firm uses penetration pricing, it sets a low initial price for a product to quickly gain market share. This strategy is distinct from predatory pricing, which is illegal and intended to eliminate competitors. The correct option is D.
Step-by-step explanation:
A firm is using a penetration pricing strategy when it introduces a product at a very low price to gain market share early on. This approach is distinct from skimming pricing, where a product is introduced at a high price to maximize profits from customers willing to pay more, before lowering the price over time.
Penetration pricing can be effective in quickly establishing a presence in a competitive market, though a firm must be careful not to initiate predatory pricing, which involves sharp but temporary price cuts to discourage competition and is illegal under U.S. antitrust law.
Hence, Option D is correct.