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NSSCAS Business Studies (8245) study materials
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NSSCAS Business Studies (8245) practice questions

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Question 1Business activity, objectives and structure

Which statement best describes the purpose of a mission statement for a business?

  1. It states the long-term reason the business exists and its core values. Correct answer.
  2. It lists the names of the shareholders and their shareholdings.
  3. It records the daily operating tasks assigned to each employee.
  4. It sets the legally binding price of the business's main product.

Explanation

A mission statement expresses the overarching purpose and guiding values of a business, giving direction to strategy and decision-making. It is not an operational document, a pricing instrument or a shareholder register.

Question 2Business activity, objectives and structure

A business sets a target of increasing its market share from 20% to 25% within two years. This target is best described as which type of objective?

  1. A mission statement
  2. An operational day-to-day instruction
  3. A social objective
  4. A SMART corporate objective Correct answer.

Explanation

The target is specific, measurable, time-bound and achievable, which are the features of a SMART objective. It concerns competitive position rather than social contribution or routine operations.

Question 3Business activity, objectives and structure

Which feature distinguishes a public limited company (PLC) from a private limited company (Ltd)?

  1. A PLC must have at least two directors.
  2. A PLC is always owned by the government.
  3. A PLC has unlimited liability for its shareholders.
  4. A PLC can offer its shares for sale to the general public. Correct answer.

Explanation

The defining legal advantage of a public limited company is that it may raise capital by offering shares to the public, typically through a stock exchange. Both company forms normally have limited liability and are owned by shareholders.

Question 4Business activity, objectives and structure

Which of the following is an example of a business objective rather than a business strategy?

  1. Launching a premium product line to attract wealthier customers
  2. Increasing profit by 8% over the next financial year Correct answer.
  3. Reducing staff turnover by improving induction training
  4. Opening a new factory in a low-cost region

Explanation

An objective is the outcome a business wants to achieve, such as a specified rise in profit. The other options describe the methods or actions used to pursue such outcomes, which are strategies.

Question 5Business activity, objectives and structure

A sole trader wants to expand but is unwilling to share ownership or control. Which source of finance is most consistent with this aim?

  1. Taking out a bank loan Correct answer.
  2. Selling a majority stake to a venture capitalist
  3. Forming a partnership with a new investor
  4. Issuing new ordinary shares to investors

Explanation

A bank loan provides funds while the sole trader retains full ownership and control, with repayment through interest and instalments. The other options all involve giving up some ownership or control to other parties.

Question 6Business activity, objectives and structure

Two firms merge: one is a bakery and the other is a flour mill that supplies it. Which type of integration does this represent?

  1. Horizontal integration
  2. Vertical integration forwards
  3. Vertical integration backwards Correct answer.
  4. Conglomerate integration

Explanation

Backward vertical integration occurs when a business merges with a supplier earlier in its supply chain, as the bakery joining with its flour supplier illustrates. Forward integration would involve merging with a customer or distributor instead.

Question 7Business activity, objectives and structure

Which statement best explains why a business might adopt a not-for-profit legal structure?

  1. To reinvest any surplus into achieving its social aims Correct answer.
  2. To avoid paying any wages to its employees
  3. To maximise the dividends paid to its shareholders
  4. To remove the need for any financial record-keeping

Explanation

Not-for-profit organisations such as charities or social enterprises direct any surplus back into their stated purpose rather than distributing it to owners. They still employ staff and must keep accounts.

Question 8Business activity, objectives and structure

A business has the objective of maximising shareholder value. Which decision is most consistent with this objective?

  1. Cutting investment in research to boost short-term dividends
  2. Increasing long-term profitability through efficiency improvements Correct answer.
  3. Reducing prices below cost to gain market share
  4. Paying all surplus to employees as bonuses

Explanation

Maximising shareholder value generally requires sustainable growth in profits and returns over time, which efficiency improvements support. Actions that damage long-term performance or divert surplus away from owners conflict with the objective.

Question 9Business activity, objectives and structure

A company's organisational structure has a narrow span of control. Which consequence is most likely?

  1. There are fewer levels of hierarchy in the organisation.
  2. Managers supervise many subordinates directly.
  3. Employees require less guidance from their managers.
  4. Managers supervise few subordinates, allowing closer supervision. Correct answer.

Explanation

Span of control refers to the number of subordinates reporting directly to a manager. A narrow span means fewer subordinates per manager, enabling closer supervision but often creating a taller hierarchy.

Question 10Business activity, objectives and structure

In a tall organisational structure, which problem is most likely to arise?

  1. Employees have no clear line of reporting.
  2. Managers are forced to supervise excessively large teams.
  3. The business is unable to delegate any authority.
  4. Communication between senior management and front-line staff becomes slower. Correct answer.

Explanation

A tall structure has many levels of hierarchy, so messages must pass through more layers, slowing communication and increasing the risk of distortion. Wide spans, not tall structures, create large teams per manager.

Question 11Business activity, objectives and structure

A business with a functional structure organises its departments by which basis?

  1. Geographical region
  2. Product brand
  3. Type of business function such as marketing or finance Correct answer.
  4. Individual customer account

Explanation

A functional structure groups employees according to the specialised function they perform, such as marketing, finance or human resources. Grouping by region, customer or product describes other structural types.

Question 12Business activity, objectives and structure

Which of the following is the clearest example of delegation?

  1. A manager reduces the number of levels in the hierarchy.
  2. A manager assigns a routine reporting task to a trained subordinate with authority to complete it. Correct answer.
  3. A manager transfers ownership of the business to employees.
  4. A manager completes all the team's work personally to ensure quality.

Explanation

Delegation involves passing authority and responsibility for a specific task to a subordinate while accountability remains with the manager. It is not the same as completing work personally, changing ownership or altering hierarchy.

Question 13Business activity, objectives and structure

A growing retail chain decides to organise each store as a separate division with its own management team. Which advantage is most likely to result?

  1. Each division can respond more closely to local market conditions. Correct answer.
  2. The business eliminates duplication of functions across divisions.
  3. Decision-making becomes fully centralised at head office.
  4. Head office loses all ability to coordinate the divisions.

Explanation

A divisional structure gives each unit its own management, allowing decisions to reflect local markets and customers. A recognised drawback is duplication of functions across divisions, and some coordination by head office usually remains.

Question 14Business activity, objectives and structure

A sole trader business becomes a private limited company. Which change occurs for the owner?

  1. The owner becomes an employee of the government.
  2. The owner must sell shares on a stock exchange.
  3. The owner gains limited liability for business debts. Correct answer.
  4. The owner loses the right to receive any profit.

Explanation

Incorporation as a private limited company creates a separate legal identity, so the owner's liability for business debts is limited to their invested capital. The owner still receives profit as a shareholder and need not list shares publicly.

Question 15Business activity, objectives and structure

Which factor most directly explains why many small businesses remain as sole traders rather than incorporating?

  1. Incorporation is prohibited for businesses below a certain size.
  2. Sole traders have complete control and face simpler, cheaper administration. Correct answer.
  3. Sole traders automatically enjoy limited liability.
  4. Incorporation prevents the owner from keeping profits.

Explanation

Sole traders benefit from full decision-making control and minimal administrative and reporting costs, which suits many small-scale operations. Incorporation remains available to them but brings additional regulation and shared ownership.

Question 16Business activity, objectives and structure

A business states that it aims to be 'the most sustainable supplier in its industry'. This statement is best classified as which element of business planning?

  1. A cash flow forecast
  2. A break-even calculation
  3. An operational budget
  4. A vision or mission-level aim Correct answer.

Explanation

A broad aspirational statement about the business's long-term identity and purpose belongs at the vision or mission level of aims. Budgets, forecasts and break-even calculations are quantitative planning tools rather than statements of purpose.

Question 17Business activity, objectives and structure

A firm's managers set a target of reducing unit costs by 5% while maintaining quality. Which functional area is most directly responsible for delivering this objective?

  1. The finance department
  2. The human resources department
  3. The marketing department
  4. The operations or production department Correct answer.

Explanation

Unit costs are determined largely by production efficiency, so operations management is the function most directly responsible. Marketing, HR and finance support the objective but do not control production costs as directly.

Question 18Business activity, objectives and structure

Which statement correctly distinguishes a private sector organisation from a public sector organisation?

  1. Private sector organisations are owned and controlled by individuals or shareholders. Correct answer.
  2. Public sector organisations are always funded by share issues.
  3. Private sector organisations never aim to make a profit.
  4. Public sector organisations cannot employ staff.

Explanation

Private sector organisations are owned by individuals, partners or shareholders, whereas public sector organisations are owned and controlled by government. Profit aims and employment are not the distinguishing criteria.

Question 19Business activity, objectives and structure

A company decides to move from a centralised to a decentralised decision-making approach. Which outcome is most likely?

  1. Local managers can respond more quickly to customer needs. Correct answer.
  2. The number of management levels falls to zero.
  3. All decisions must be approved by senior management.
  4. The business loses consistency in its brand image entirely.

Explanation

Decentralisation gives local managers authority to make decisions, improving responsiveness to local conditions. It does not eliminate senior management or necessarily destroy brand consistency, though it may reduce uniformity.

Question 20Business activity, objectives and structure

An entrepreneur is choosing between a partnership and a private limited company. Which consideration is most relevant to the choice?

  1. Whether the business will sell goods or services
  2. How much personal liability the owners are willing to accept Correct answer.
  3. Whether the business will need to raise capital from the public
  4. Whether the business will employ any staff

Explanation

A key difference is that a private limited company offers limited liability while a partnership normally exposes partners to unlimited liability, so the owners' willingness to bear risk is central. Employment and the nature of the product do not determine legal structure.

Question 21Business activity, objectives and structure

A business with a flat structure and wide spans of control is experiencing poor quality work. Which explanation is most consistent with its structure?

  1. There are too many layers of management between senior and junior staff.
  2. Managers have too little time to supervise and support each subordinate closely. Correct answer.
  3. Employees have no delegated authority to make any decisions.
  4. The business has too few subordinates per manager.

Explanation

Wide spans mean each manager oversees many subordinates, limiting the time available for individual supervision and support, which can reduce quality. Too many layers and too few subordinates describe the opposite structural features.

Question 22Business activity, objectives and structure

A conglomerate merger is most likely to reduce risk for the combined business because of which reason?

  1. It allows the business to avoid paying corporation tax.
  2. It combines businesses whose revenues may be affected differently by economic conditions. Correct answer.
  3. It eliminates all competition in the original market.
  4. It guarantees economies of scale in a single market.

Explanation

Conglomerate mergers join unrelated businesses, so downturns in one market may be offset by stability or growth in another, diversifying risk. They do not by themselves create single-market scale economies, remove competition or change tax obligations.

Question 23Business activity, objectives and structure

A social enterprise aims to create employment for long-term unemployed people while covering its costs. Which objective conflict is most likely to arise?

  1. Between making a profit and paying corporation tax
  2. Between choosing a legal structure and registering a name
  3. Between keeping prices low and paying employees fairly Correct answer.
  4. Between expanding output and hiring more staff

Explanation

A social enterprise may need to charge low prices to serve its target group while also paying fair wages to its employees, creating tension between affordability and worker welfare. The other pairs do not represent genuine conflicting objectives.

Question 24Business activity, objectives and structure

Which statement best explains why a business's objectives may change over time?

  1. Objectives are fixed by law and cannot change.
  2. Objectives only change when the business changes its name.
  3. Objectives are set once at start-up and never reviewed.
  4. Changes in market conditions, competition and stakeholder expectations may require new priorities. Correct answer.

Explanation

Objectives respond to the business environment, so shifts in competition, technology, regulation or stakeholder expectations can prompt revised priorities. They are not legally fixed or set permanently at start-up.

Question 25Business environment, stakeholders and corporate social responsibility

A government introduces a minimum wage above the level currently paid to workers in a firm's industry. Which stakeholder group benefits most directly from this change?

  1. The firm's suppliers
  2. The firm's low-paid employees Correct answer.
  3. The firm's shareholders
  4. The firm's customers

Explanation

A minimum wage raises the pay of the workers who were previously earning below the new legal floor, so those employees gain income directly. Shareholders and customers are affected indirectly through higher costs and possible price rises, and suppliers are largely unaffected by wage legislation.

Question 26Business environment, stakeholders and corporate social responsibility

Which term describes the conflict that arises when a firm's managers pursue rapid expansion while its shareholders prefer steady dividend payments?

  1. Stakeholder conflict Correct answer.
  2. Corporate social responsibility
  3. Market segmentation
  4. Economies of scale

Explanation

Stakeholder conflict occurs when different groups with an interest in the business pursue objectives that cannot all be satisfied at once. Managers seeking growth and shareholders seeking dividends are competing stakeholders, so their competing aims create this conflict.

Question 27Business environment, stakeholders and corporate social responsibility

A clothing retailer decides to source only from factories that pay a living wage, even though this raises its costs. Which term best describes this decision?

  1. Horizontal integration
  2. Price skimming
  3. Profit maximisation
  4. Corporate social responsibility Correct answer.

Explanation

Corporate social responsibility is the acceptance by a business of a duty to act in the interests of society beyond its legal minimum obligations. Choosing ethical suppliers at higher cost is a voluntary social commitment, so it fits this concept.

Question 28Business environment, stakeholders and corporate social responsibility

Which of the following is an example of a pressure group influencing a business's behaviour?

  1. A government increases the rate of corporation tax
  2. A firm's competitor launches a new advertising campaign
  3. An environmental charity campaigns against a firm's plastic packaging and the firm changes its policy Correct answer.
  4. A bank raises the interest rate on a firm's overdraft

Explanation

Pressure groups are organised bodies that seek to influence business and government decisions without seeking office themselves. A campaign that persuades a firm to change its packaging is direct pressure-group influence.

Question 29Business environment, stakeholders and corporate social responsibility

Which of the following best describes a business's external stakeholders?

  1. Employees who hold shares in the business
  2. Groups outside the business who are affected by its activities Correct answer.
  3. Managers responsible for daily operations
  4. Members of the board of directors

Explanation

External stakeholders are individuals and groups outside the organisation, such as customers, suppliers, local communities and government, who are affected by its decisions. Internal stakeholders, by contrast, work within the business.

Question 30Business environment, stakeholders and corporate social responsibility

Which of the following is a likely benefit to a firm of adopting a strong corporate social responsibility policy?

  1. Improved brand reputation and customer loyalty Correct answer.
  2. Certainty of higher short-term profits
  3. Elimination of all competition in its market
  4. Guaranteed reduction in production costs

Explanation

A credible CSR policy can strengthen brand image and build customer trust, which may support sales and loyalty over time. It does not guarantee lower costs, higher short-term profit or freedom from competition, and may even raise costs.

Question 31Business environment, stakeholders and corporate social responsibility

A local council approves planning permission for a supermarket to build a new store only after the firm agrees to fund a new pedestrian crossing. Which stakeholder relationship does this illustrate?

  1. The firm competing with a rival retailer for customers
  2. The firm coordinating with a trade union over pay
  3. The firm responding to pressure from its shareholders
  4. The firm negotiating with a government body that regulates its operations Correct answer.

Explanation

Local councils are government stakeholders with regulatory power over planning, and the firm must negotiate conditions to obtain approval. Funding the crossing is a concession made to secure the council's consent, showing government influence over business decisions.

Question 32Business environment, stakeholders and corporate social responsibility

A firm's shareholders want higher dividends while its employees demand a pay rise. Which factor would most likely increase the tension between these two groups?

  1. An increase in the firm's unused factory space
  2. A rise in the number of competitors
  3. A fall in the firm's profits Correct answer.
  4. A decrease in the firm's advertising budget

Explanation

When profits fall, the total funds available for distribution are smaller, so paying higher dividends and higher wages at the same time becomes harder. This scarcity intensifies the conflict between shareholders and employees over the firm's income.

Question 33Business environment, stakeholders and corporate social responsibility

A multinational opens a factory in a developing country. Which action would best demonstrate that it is acting in a socially responsible way towards the local community?

  1. Paying the lowest wage the local law permits
  2. Importing all workers from its home country
  3. Sending all profits back to its home country
  4. Investing in local schools and training programmes for residents Correct answer.

Explanation

Social responsibility towards a host community involves contributing to local welfare beyond legal requirements, such as education and skills training. Such investment builds local capacity and goodwill, which is the essence of community-focused CSR.

Question 34Business environment, stakeholders and corporate social responsibility

Which of the following best explains why a business might consult a trade union before changing shift patterns?

  1. To reduce the risk of industrial action and maintain workforce cooperation Correct answer.
  2. To satisfy its shareholders' demand for higher dividends
  3. To avoid paying corporation tax to the government
  4. To increase the price of its products in the market

Explanation

Trade unions represent employees in negotiations over working conditions, and consulting them can prevent disputes and strikes. Maintaining cooperation helps the firm implement change smoothly and protects productivity.

Question 35Business environment, stakeholders and corporate social responsibility

A government raises the tax on sugary drinks, and a beverage manufacturer responds by reformulating its products to cut sugar. Which term best describes the government's use of taxation here?

  1. A monetary policy tool to control interest rates
  2. A fiscal measure used to influence business behaviour Correct answer.
  3. A form of corporate social responsibility by the firm
  4. A competition policy to break up monopolies

Explanation

Taxation is a fiscal instrument, and governments use it to change the incentives businesses face, here encouraging lower-sugar products. The firm's reformulation shows the tax altering business behaviour, which is the intended regulatory effect.

Question 36Business environment, stakeholders and corporate social responsibility

A firm claims to be socially responsible but its suppliers are found to use child labour. What is the most likely consequence for the firm's stakeholders?

  1. A guaranteed increase in the firm's market share
  2. Higher employee wages across the industry
  3. Damage to the firm's reputation that may reduce customer loyalty and shareholder returns Correct answer.
  4. Immediate exemption from all government regulation

Explanation

When a CSR claim is contradicted by supply-chain practices, public trust is damaged, which can reduce sales and investor confidence. Customers may boycott and shareholders may see lower returns, showing how ethical failures affect multiple stakeholders.

Question 37Business environment, stakeholders and corporate social responsibility

Which of the following is the best example of a business responding to consumer stakeholder influence?

  1. A firm borrows from a bank to fund expansion
  2. A food company removes a controversial additive after customer complaints Correct answer.
  3. A firm merges with a rival to gain market share
  4. A firm reduces its workforce to cut costs

Explanation

Consumers influence business decisions through their purchasing choices and complaints, and a firm that changes a product in response is reacting to that pressure. Removing the additive shows consumer preferences directly shaping product decisions.

Question 38Business environment, stakeholders and corporate social responsibility

An investor refuses to buy shares in a firm with poor environmental records, and the firm subsequently invests in cleaner technology. Which concept does this best illustrate?

  1. Price elasticity of demand affecting revenue
  2. Ethical investment influencing corporate behaviour Correct answer.
  3. Division of labour improving efficiency
  4. Economies of scale reducing unit costs

Explanation

Ethical investment means directing funds towards businesses that meet social or environmental standards and away from those that do not. The firm's decision to invest in cleaner technology shows investor pressure changing corporate behaviour.

Question 39Business environment, stakeholders and corporate social responsibility

A government wishes to encourage firms to reduce carbon emissions without banning production. Which combination of measures would most directly achieve this?

  1. A carbon tax combined with subsidies for clean technology Correct answer.
  2. A reduction in corporation tax combined with looser planning rules
  3. A rise in the minimum wage combined with tighter advertising rules
  4. An increase in interest rates combined with higher import tariffs

Explanation

A carbon tax raises the cost of polluting, while subsidies for clean technology lower the cost of greener alternatives, so together they change incentives without prohibiting output. This combination uses market signals to steer firms towards lower emissions.

Question 40Business environment, stakeholders and corporate social responsibility

A firm's managers argue that maximising short-term profit best serves all stakeholders. Which criticism of this view is most consistent with stakeholder theory?

  1. It prevents the firm from paying any taxes
  2. It removes the need for a marketing department
  3. It may sacrifice employee welfare and community interests for shareholder gain Correct answer.
  4. It guarantees the firm will fail in the long run

Explanation

Stakeholder theory holds that a business should balance the interests of all affected groups, not only owners. Pursuing short-term profit can mean cutting wages, delaying investment or ignoring environmental costs, which harms employees and communities.

Question 41Business environment, stakeholders and corporate social responsibility

A large retailer pressures its suppliers to cut prices sharply. Which effect on the suppliers' stakeholders is most likely?

  1. Higher profits for suppliers that allow greater investment in staff
  2. Squeezed profit margins that may force lower wages or reduced quality for workers and customers Correct answer.
  3. Increased bargaining power for suppliers' employees
  4. Improved product quality for consumers at no extra cost

Explanation

When a powerful buyer forces down prices, suppliers face thinner margins and may respond by cutting costs, often through lower wages or cheaper inputs. This shows how pressure exerted by one stakeholder group can harm others in the supply chain.

Question 42Business environment, stakeholders and corporate social responsibility

A firm publicly commits to net-zero emissions but continues to expand fossil-fuel operations. Which term best describes this gap between stated policy and practice?

  1. Horizontal integration
  2. Greenwashing Correct answer.
  3. Market failure
  4. Price discrimination

Explanation

Greenwashing is the practice of making misleading environmental claims to appear more responsible than the business actually is. A public net-zero pledge combined with continued high-emission expansion is a clear example of this mismatch.

Question 43Business environment, stakeholders and corporate social responsibility

A government introduces stricter data-protection laws that raise compliance costs for online retailers. Which analysis best reflects the effect on stakeholders?

  1. Consumers gain stronger privacy protection while firms face higher costs that may be passed on as higher prices Correct answer.
  2. Consumers lose protection while firms enjoy lower costs
  3. Shareholders gain guaranteed higher dividends
  4. Employees are certain to receive higher wages

Explanation

Data-protection laws are intended to protect consumers, giving them greater privacy and control over personal information. Firms must spend on compliance, and some of that cost may be passed to customers through prices, so benefits and costs fall on different stakeholders.

Question 44Business environment, stakeholders and corporate social responsibility

Which statement best explains why stakeholder objectives often conflict in a business?

  1. Government regulation removes all stakeholder differences
  2. All stakeholders always share identical goals
  3. Stakeholders have no interest in the firm's decisions
  4. Resources and profits are limited, so gains for one group usually mean sacrifices for another Correct answer.

Explanation

A business operates with finite revenue and resources, so satisfying one group, such as shareholders seeking dividends, can reduce what is available for others, such as employees seeking higher pay. This scarcity of resources is the underlying reason stakeholder objectives frequently clash.

Question 45Marketing and market research

A business segments its market by dividing consumers according to age, gender and income level. Which type of segmentation is being used?

  1. Behavioural segmentation
  2. Demographic segmentation Correct answer.
  3. Geographic segmentation
  4. Psychographic segmentation

Explanation

Demographic segmentation groups consumers by measurable population characteristics such as age, gender, income and family life cycle. Geographic segmentation uses location, psychographic uses lifestyle and personality, and behavioural uses usage rate or loyalty.

Question 46Marketing and market research

Which statement best describes the main purpose of market research for a firm launching a new product?

  1. To reduce the risk of making poor marketing decisions Correct answer.
  2. To guarantee that the new product will earn a profit
  3. To replace the need for a marketing budget
  4. To set the price at exactly what competitors charge

Explanation

Market research supplies information about customer needs, demand and competition so that decisions are better informed. It cannot guarantee profit or remove the need for marketing spending, but it lowers the uncertainty surrounding a launch.

Question 47Marketing and market research

A researcher stands in a shopping centre and asks every tenth passer-by to complete a short questionnaire. Which sampling method is described?

  1. Systematic sampling Correct answer.
  2. Quota sampling
  3. Stratified sampling
  4. Random sampling

Explanation

Systematic sampling selects respondents at fixed intervals from a list or flow of people, such as every tenth person. It differs from random sampling, where each member has an equal chance of selection, and from quota or stratified methods that build groups first.

Question 48Marketing and market research

A company sells its products through its own retail outlets and its own website, with no intermediaries. Which distribution channel is this?

  1. Three-stage channel
  2. One-stage channel
  3. Zero-level channel Correct answer.
  4. Two-stage channel

Explanation

A zero-level, or direct, channel links the producer straight to the consumer without any intermediary. Each additional intermediary, such as a retailer or wholesaler, adds a level to the channel.

Question 49Marketing and market research

Which element of the marketing mix is most directly concerned with where and when customers can obtain a product?

  1. Place Correct answer.
  2. Price
  3. Product
  4. Promotion

Explanation

Place covers distribution decisions, including the channels used, outlet location and availability of the product to customers. Product concerns design and features, price concerns value exchanged, and promotion concerns communication with buyers.

Question 50Marketing and market research

A firm sets a high introductory price for a new smartphone to attract buyers who want the product first. Which pricing strategy is being used?

  1. Penetration pricing
  2. Cost-plus pricing
  3. Price skimming Correct answer.
  4. Competitive pricing

Explanation

Price skimming sets a high launch price to capture early adopters before lowering it later. Penetration pricing does the opposite, using a low initial price to build market share quickly.