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

question 9

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.

---

Definitions:

ETFs

Exchange-Traded Funds, investment funds that are traded on stock exchanges much like stocks and typically track an index, a commodity, bonds, or a basket of assets.

Russell 2000

An index measuring the performance of approximately 2,000 smallest-cap American companies in the Russell 3000 Index, which represents the entire U.S. stock market.

Diversified Portfolio

A financial approach that diversifies holdings over multiple asset types to mitigate risk.

ETFs

Exchange-Traded Funds, investment funds traded on stock exchanges, much like stocks, which hold assets such as stocks, commodities, or bonds.