Cesar Claims He Found a Definite Way to Save Money

question 96

Multiple Choice

Cesar claims he found a definite way to save money, "Buy direct from the manufacturer. Any time intermediaries get involved, you'll pay a higher price. After all, every intermediary involved in the marketing process must charge enough to earn a profit." What do you make of Cesar's claim?

• A) It is entirely correct. Intermediaries must charge a high enough price for the activities they perform to earn a profit, so using intermediaries must result in a higher price.
• B) It is impractical, because in most markets the distribution process is so complex that it is impossible to determine who the actual producer really is.
• C) It is not valid in many cases. Intermediaries do add costs to products, but they also create value by performing marketing functions efficiently. In many cases the value they create more than offsets the costs they add.
• D) It is never true. Markets that make use of intermediaries can always provide goods at lower cost than those that rely on direct distribution.

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