Final answer:
a. The company typically lowers the price of a product after using a price skimming strategy to attract more price-sensitive customers, seeking to maximize profits by finding a balance between price and quantity sold.
Step-by-step explanation:
When the price of a new product is set via price skimming, after the first round of sales has saturated the high-price market, the company typically lowers its price somewhat to attract customers from the next segment. This strategy allows the company to capture the surplus from each segment of the market willing to pay more at the outset and then gradually target more price-sensitive customers by dropping the price over time.
The rationale behind this approach is grounded in economics, where a monopolist seeks to strike a balance between price and quantity to maximize profits. As the market demand adjusts, the company avoids setting the price too high to prevent loss of revenue from low sales and avoids setting it too low to prevent loss of potential revenue from higher quantities sold at lower prices.