# With an overhead of 100000 and a contribution per

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With an overhead of \$100,000 and a contribution per unit of \$50, the entrepreneur will need to sell 2000 units to break even. With an overhead of \$200,000, the entrepreneur will need to sell 4000 units to break even. AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 13-04 Describe how to calculate a product's break-even point. Topic: 5 Cs of Pricing 223. (p. 278) Gerhard explains the concept of break-even analysis to his father who owns a daycare center. Gerhard's father grimaces, saying, that break-even analysis is too simplistic and won't work for him. What specific limitations associated with break-even analysis will Gerhard's father probably point out? First, even in a relatively simple business like a daycare center, he probably charges different prices depending on the age of the child, not one price. Second, prices change with multi-child discounts. Third, break-even analysis does not help him estimate how many children he will have in the center, only how many he needs to break even. AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 13-04 Describe how to calculate a product's break-even point. Topic: 5 Cs of Pricing 224. (p. 280) Why is it more fun and challenging for a marketer to be part of a market characterized by monopolistic competition than be part of one characterized by pure competition? In pure competition, all products are similar and price is determined by the marketplace; supply and demand. In monopolistic competition, each firm attempts to differentiate their product or service from the competing firms. This gives the firm some brand loyalty, a less

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elastic demand curve, and the opportunity to continually create and promote differences in their products. AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 13-05 Indicate the four types of competition. Topic: 5 Cs of Pricing 225. (p. 281- 282) How have price comparison websites like Pricegrabber.com affected marketers' pricing strategies? Consumers now have a wealth of easily-accessible information about prices. This has made consumers in many markets more price sensitive, forcing marketers to find other ways to create value though customer service, advice and expertise, and after-the-sale services. AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 13-01 List the four pricing orientations. Topic: Macro Influences on Pricing 226. (p. 268) What does "price is the overall sacrifice a consumer makes to acquire a product" mean? It means price is more than just the money paid. It also includes nonmonetary costs such as the value of time, travel cost, taxes, and shipping. AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 13-01 List the four pricing orientations. Topic: Pricing Concepts 227. (p. 269) Chet knows that the pro shops selling his tennis racquets will "keystone" his product. He also knows sales will decline significantly if the retail price is greater than \$100. What is the maximum wholesale price Chet can charge?
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