A company is offering Product X, a new generation media device, in a foreign market for the first time. The company's CEO favors the adoption of a pricing strategy that adds a 30 percent markup to costs. However, the company's CFO believes that the firm should charge lower prices similar to what they charge in the domestic market. Which of the following, if true, would weaken the case for charging the same price in both markets? O A. The company had earlier tried price discrimination in the domestic market but failed. O B. Consumers in both markets have similar price elasticity of demand. O C. Both countries have similar inflation levels D. Consumer preferences are markedly different in the two markets O E. Technology companies are known to successfully practice price discrimination in different markets.

Question

Business

Gregory Lloyd

Today, 03:15

A company is offering Product X, a new generation media device, in a foreign market for the first time. The company's CEO favors the adoption of a pricing strategy that adds a 30 percent markup to costs. However, the company's CFO believes that the firm should charge lower prices similar to what they charge in the domestic market. Which of the following, if true, would weaken the case for charging the same price in both markets? O A. The company had earlier tried price discrimination in the domestic market but failed. O B. Consumers in both markets have similar price elasticity of demand. O C. Both countries have similar inflation levels D. Consumer preferences are markedly different in the two markets O E. Technology companies are known to successfully practice price discrimination in different markets.

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Answers (1)

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Laurel Garrett · Answer 1

The correct answer is letter "D": Consumer preferences are markedly different in the two markets.

Explanation:

Price discrimination comes into place when a good or service is offered at different prices to different people. For price discrimination to be legal, the benefited party must be somehow unfavored which mill justify the differences in the price offers.

In the business world, companies apply price discrimination as well when their products are sold in different regions. This is to attract new customers who do not have the same preferences as the company's consumers in its usual region.