Question

1. the most important determinant of how high or low the price for your product will be is

a. your cost,

b. your desired profit margin

c. your investement

d. the nature and intensity of the competition (pricing environemtn)

e. the stage that your product is in thr life style

2. when considering break even analysis, the best decision to make with regard to price is

a. choose the hoghest selling price

b. choose the selling price that gives you the lowest break even point

c. imitate the competition

d. analyze the market demand and competitve environemnt before deciding

e. choose the lowest price because you can alwaus raise it later

Answer 1

Answer 1 – a. your cost

The most important factor affecting the price of a product is its cost. Cost helps in determining the price of a product. Companies always fix a price that would at least cover their costs and increase or decrease their sale prices depending upon the increase or decrease in their costs. Thus, the most important determinant of how high or low the price for your product will be cost of the product. All other options mentioned are also important like profit margin, competitor’s prices, etc. but they all come after the cost determinant.

Answer 2 - b. choose the selling price that gives you the lowest breakeven point

When considering break even analysis, the best decision to make with regard to price is choosing the selling price that gives you the lowest breakeven point. In break even analysis, companies analyse their costs and find a breakeven point where there is no profit and no loss. Best decision for companies is to choose a selling price that will give them lowest breakeven point. Lowest breakeven point means companies can earn sooner by reducing their costs.