Question

True or false: price skimming is ideal when there is little to no competition in the market

Answer 1

True. Price skimming is a strategy often used when a product is new and there is little to no competition in the market. By setting a high initial price, companies can maximize profits from early adopters who are willing to pay more. As competition increases or the initial demand is met, the price can gradually be lowered to attract more price-sensitive customers.