Compare the Following Statements and Select the One That Is

question 50

Multiple Choice

Compare the following statements and select the one that is accurate regarding a profit maximization strategy.

• A)A profit maximization strategy sets prices low to encourage a greater volume of purchases and lower the level of involvement for the consumer.
• B)Profit maximization should not be used as a permanent pricing objective,but is effective in allowing a firm to endure a difficult time.
• C)A profit maximization strategy is best used when a product is in the growth and maturity stage of the product life cycle.
• D)Profit maximization assumes that customers value a product's differentiating attributes and are willing to pay a higher price to take advantage of those attributes.
• E)For a profit maximization strategy to work over the long term,the firm must have a significant cost or resource advantage over competitors.

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Definitions:

Net Profit

The amount of profit left over after all expenses and taxes have been subtracted from total revenue.

Pretax Profit

The earnings a company generates before taxes are deducted.

Common Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's profits or losses.

Dividend Payments

Cash payments made by a company to its shareholders, usually derived from the company's profits.