2.2.2a Pricing strategies Quiz: Pearson Edexcel Business, Unit 7

The 20 questions

1. Penetration pricing means:

   • setting a low price at launch to win market share quickly
   • setting the price according to what rivals charge
   • setting a price that is never changed
   • setting a high price at launch to recover development costs

2. Price skimming means:

   • setting a high price at launch and lowering it over time
   • setting a low price at launch and raising it later
   • giving products away to build loyalty
   • matching the price of the market leader

3. Competitive pricing means:

   • charging customers whatever they are willing to pay
   • setting the highest price in the market
   • ignoring competitors when setting the price
   • setting prices in line with, or just below, rivals' prices

4. Which pricing strategy suits a new product with unique features and few rivals?

   • Penetration pricing
   • Loss leading
   • Price skimming
   • Matching the price of a fixed rival

5. Which strategy aims to win a large market share in a competitive market?

   • Penetration pricing
   • Price skimming
   • Premium pricing
   • Prestige pricing

6. A loss leader is a product:

   • sold at the highest price to maximise profit on every sale
   • sold at or below cost to draw in other purchases
   • given away free to competitors to win their loyalty
   • that no shop ever stocks because it is always unpopular

7. Psychological pricing is shown by:

   • a price of £10 exactly
   • the same price in every shop
   • a price of £9.99 instead of £10
   • a price of £100 for every product

8. Which pricing approach is most useful for quickly selling slow-moving stock?

   • Discounting or a special offer
   • Premium pricing
   • Prestige pricing
   • Price skimming at launch

9. A new product costs £8 per unit to make. It is launched at £20 and later reduced to £14. What is the profit per unit at the lower price?

   • £8
   • £22
   • £6
   • £12

10. A firm uses penetration pricing at £5 per unit, while rivals charge £7. How does its price compare?

    • £2 cheaper
    • £5 dearer
    • £2 dearer
    • £12 cheaper

11. A business sells a printer at a loss to sell expensive ink cartridges. Which strategy is this?

    • Price skimming
    • Penetration pricing
    • Loss leader
    • Premium pricing

12. A premium brand sets a high price to signal quality. Which strategy is this?

    • Competitive pricing that matches the prices rivals charge
    • Penetration pricing set low to win a large share fast
    • Loss leading to sell more of the other products
    • Prestige or premium pricing

13. A firm reduces a product price from £80 to £60 for a summer sale. What is the percentage reduction?

    • 33%
    • 75%
    • 20%
    • 25%

14. A new games app is free for a month and then costs £4. Which strategy is this?

    • Price skimming
    • Prestige pricing
    • Penetration pricing
    • Competitive undercutting of a fixed rival

15. Evaluate: when is price skimming more suitable than penetration pricing?

    • When the cost of making the product is zero
    • When the firm wants to win a large share quickly in a crowded market
    • When the product is unique and demand is strong at a high price
    • When many rivals sell identical products

16. A firm sells 2,000 units at £20 with a unit cost of £12. A 10% price cut to £18 raises sales to 2,600 units. Which is true?

    • Total profit falls by £400
    • Total profit rises by £1,600
    • Total profit is unchanged
    • Total profit rises by £400

17. Why might a firm choose a loss leader despite selling that item at a loss?

    • To avoid all competitors in the market
    • To attract customers who then buy profitable items
    • To increase the unit cost of production permanently
    • Because the government requires it

18. A firm launches a product at £30 to match rivals priced at £30. Which pricing approach is it using?

    • Competitive pricing
    • Price skimming
    • Loss leading
    • Penetration pricing

19. A retailer offers buy one get one free on a product. Which strategy best describes this?

    • Premium pricing that signals quality through a high price
    • A promotional pricing offer
    • Price skimming with a high launch price for early buyers
    • Cost-plus pricing that adds a fixed margin to unit cost

20. Which pricing approach is most at risk of starting a price war?

    • Prestige pricing for luxury goods sold to wealthy buyers
    • Price skimming with a strong brand and loyal customers
    • Premium pricing for a unique product with few rivals
    • Competitive pricing that repeatedly undercuts rivals

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