10 Questions
What is the primary basis for determining the price of a product in cost-plus pricing?
Average cost of production
What is the purpose of the mark-up in cost-plus pricing?
To generate profit
What is a potential limitation of cost-plus pricing?
It does not consider the state of the market
What is the main goal of penetration pricing?
To gain market share
What is a benefit of producing on a large scale, as mentioned in the context of penetration pricing?
Achieving internal economies of scale
Which pricing strategy is most effective when demand is price sensitive?
Price penetration
What is the main goal of predatory pricing?
To remove competition and increase prices later
In which situation is a price-skimming strategy most appropriate?
When the firm can protect its idea or invention from competitors
What is the purpose of a loss leader?
To draw customers into the store or website to buy other products
When is a low entry price likely to be beneficial to a business?
When the business can generate high levels of sales and increase revenue
Learn about the cost-plus pricing method, a common approach to setting product prices. Understand how to calculate the average cost per unit, add a markup, and determine the final price. Test your knowledge of this business concept!
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