A firm’s pricing objective may be to survive in the market. Such an objective is adopted when the firm faces difficulties because of:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → the introduction of a more efficient substitute by a competitor
Option (1) the declaration of its product as an essential product by the Government — Incorrect. When the Government declares a product essential, it regulates its price to protect the public from unfair price fixing. This falls under the factor government and legal regulations.
Option (2) selling a new product at a price that does not cover all its costs — Incorrect. A firm may sell below full cost when it introduces a new product or enters a new market. This is the firm’s own choice.
Option (3) the introduction of a more efficient substitute by a competitor — Correct. A firm finds it hard to survive when competition is intense or a competitor brings in a more efficient substitute. To survive, it may give discounts on its products or run a promotion campaign to clear its stock.
Option (4) a rise in its fixed costs, such as the rent of its building — Incorrect. Rent is a fixed cost, a part of product cost. Product cost sets the lowest price of a product. A rise in it does not lead to the survival objective.
NCERT (2026-27 Edition): “5. Pricing Objectives: … Apart from profit maximisation, the pricing objectives of a firm may include: |