Product Costs set a(n) ___________ to a product’s price.a.demand curveb.floorc.ceilingd.experience curvee.break-even cost

Break Down the Problem

1. Identify the relationship between product costs and price.
2. Analyze the options provided to determine which best describes that relationship.

Relevant Concepts

• Product costs influence the minimum price at which a product can be sold.
• The terms "floor" and "ceiling" refer to limits in pricing, where "floor" is the lowest acceptable price.

Analysis and Detail

1. Demand Curve (a): The demand curve shows the relationship between price and quantity demanded, but does not set a specific price.
2. Floor (b): This refers to the minimum price that can be charged based on product costs.
3. Ceiling (c): This indicates the maximum price allowed, which is not directly related to costs.
4. Experience Curve (d): Refers to cost reductions over time due to increased production, not a price limit.
5. Break-even cost (e): This is the price at which total revenues equal total costs, but it doesn't set a price ceiling or floor.

Verify and Summarize

The best option that describes the influence of product costs on pricing is the floor since it sets the minimum price based on costs incurred.

Final Answer

Product Costs set a(n) floor to a product’s price. (b)