Although Break-Even Analysis and Cost-Plus Pricing Are Important Tools in Setting

question 5

Multiple Choice

Although break-even analysis and cost-plus pricing are important tools in setting prices based on the firm's cost structure, they should never be the driving force behind pricing strategy. Why?

• A) because firms want to make a profit, not just break even
• B) because customer expectations are far more important in setting prices
• C) because prices should be based on demand, not costs
• D) because different firms have different cost structures
• E) because competitor's prices are far more important in setting prices

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Definitions:

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Habituation Method

A research technique used in cognitive psychology to study the response patterns to stimuli, based on the principle that familiarity leads to a decrease in response.

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The identification of something or someone as having been previously seen, heard, or known; in psychology, it refers to recalling information from memory.

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