- A.Price minus variable cost per unit — the dollars each unit contributes to covering fixed cost and profit.
- B.Launching at a high price to capture maximum margin from price-insensitive early adopters, then lowering price to expand to broader segments. ✓
- C.Calculating the volume at which total revenue equals total cost — the minimum sales required for a product to be profitable.
- D.Launching at a high price to capture maximum margin from price-insensitive early adopters, then lowering price to expand to broader segments.
Price Skimming is launching at a high price to capture maximum margin from price-insensitive early adopters, then lowering price to expand to broader segments. The other options describe related but distinct concepts in Pricing — see the deep-dive guide for the full distinction.
How to think about questions like this
Captures consumer surplus from price-insensitive early adopters. Questions like this test whether you can distinguish Price Skimming from neighboring concepts. The most common trap is choosing a closely-related concept that sounds similar but applies in a different context.
When you see a definition question on an exam, do two things: (1) translate the question into your own words, then (2) generate the answer in your own words before reading the options. This avoids the cognitive bias of recognizing a familiar phrase as correct just because it is familiar.