Normally, higher prices are charged to cover the high cost of researc…

Normally, higher prices are charged to cover the high cost of research and development when the pricing objective of a firm is __________.

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → attaining product quality leadership

Option (1) obtaining market share leadership — Incorrect. For market share leadership, a firm keeps its prices at lower levels, so that a greater number of people buy its products.

Option (2) surviving in a competitive market — Incorrect. A firm that finds it hard to survive because of intense competition may discount its products or run a promotion campaign to clear its stock.

Option (3) maximising profit in the short run — Incorrect. To maximise profit in the short run, a firm tends to charge the maximum price. Its aim is a quick profit from each sale.

Option (4) attaining product quality leadership — Correct. A firm that wants product quality leadership offers high quality and spends a lot on research and development. So it normally charges higher prices to cover these costs.

NCERT (2026-27 Edition): “5. Pricing Objectives: Pricing objectives are another important factor affecting the fixation of the price of a product or a service. Generally the objective is stated to be maximise the profits. But there is a difference in maximising profit in the short run and in the long run. If the firm decides to maximise profits in the short run, it would tend to charge maximum price for its products. But if it is to maximise its total profit in the long run, it would opt for a lower per unit price so that it can capture larger share of the market and earn greater profits through increased sales. Apart from profit maximisation, the pricing objectives of a firm may include:
(a) Obtaining Market Share Leadership: If a firms objective is to obtain larger share of the market; it will keep the price of its products at lower levels so that greater number of people are attracted to purchase the products;
(b) Surviving in a Competitive Market: If a firm is facing difficulties in surviving in the market because of intense competition or introduction of a more efficient substitute by a competitor, it may resort to discounting its products or running a promotion campaign to liquidate its stock; and
(c) Attaining Product Quality Leadership: In this case, normally higher prices are charged to cover high quality and high cost of research and Development. …”