Correct Response: C. Price-skimming involves setting a high initial product price in order to regain costs and then lowering the price over time as demand falls off. This strategy is most effective when the new product is popular and has little competition. A product nearing the end of its life cycle (A) will have trouble being sold at any price, especially at a higher price. Price-skimming seeks to attract a small segment of early adopters willing to pay higher prices and is not as effective at capturing market share (B). A company wishing to recoup costs associated with a product in the decline stage will not increase profits by increasing the price, since higher prices will result in decreased sales (D).
