Smart Feet Inc.produces shoes that are better quality and cost more to make than the shoes of its competitors.Smart Feet realizes that there will be a large difference between the cost to produce the shoes and the consumer's willingness to pay for them.Even so,Smart Feet decides to charge the same price as its competitors.Which of the following will most likely be the result of this action?

Question

Quizplus · Accepted Answer

A large difference between the consumer's willingness to pay and the cost to produce the good or service gives the firm two distinct pricing options: (1) it can charge higher prices to reflect the higher product value and thus increase its profitability, or (2) it can charge the same price as competitors and thus gain market share.