Which of the Following Is True of Value-Based Pricing

question 49

Multiple Choice

Which of the following is true of value-based pricing?

• A)The cost of making a product and the desired profit margin are the two primary determinants in setting a value-based price.
• B)Value-based pricing does not consider what customers require from a product in terms of performance and price.
• C)Value-based pricing takes customer needs into account,but fails to consider customers' price sensitivity.
• D)In value-based pricing,price is developed around a product's relative strengths to give customers greater benefits than competing products offer.
• E)Value-based pricing is based on features of the product,but fails to consider the prices of similar products in the market.

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Definitions:

Short-Run Average Total Cost (ATC₂)

The total cost divided by the quantity produced in the short-run, where some inputs are fixed.

Diminishing Marginal Returns

A principle stating that if one factor of production is increased while others are kept constant, the resulting increase in output will eventually decline.

Short-Run Average Total Cost (ATC)

The total cost per unit of output in the short run, where some factors of production are fixed.

Profit-Maximizing Level

The output level at which a firm achieves the highest profit, where marginal revenue equals marginal cost.