Which of the following observations concerning a "reference price" is true?
A) Reference price is the company's cost to produce the product.
B) Reference price is set by regulators.
C) Demand may increase if a firm's price is lower than a customer's reference price.
D) All customers have the same reference prices for the same basic type of purchase.

Question

Quizplus · Accepted Answer

The reference price is the price against which buyers compare the actual selling price of the product and it is often based on the price customers expect to pay or have paid in the past, rather than the company's cost of production or a regulated price. If a firm's price is lower than a customer's reference price, the customer is more likely to perceive the product as a good value and demand may increase. However, different customers may have different reference prices based on their personal experiences and expectations.

Which of the Following Observations Concerning a "Reference Price" Is