Future Business Leaders of America (FBLA) Marketing Practice Test

What determines the highest possible price that can be charged for a product?

1. Brand loyalty

2. Target market

3. Production cost

4. Competition in the market

The correct answer is: Target market

The highest possible price that can be charged for a product is primarily determined by the target market. Different segments of the market have varying levels of willingness to pay based on their income, preferences, and perceived value of the product. Understanding the target market allows a business to set a price that maximizes revenue while still appealing to consumers. For instance, if a company knows its target market consists of affluent customers who value luxury, it can set higher price points, reflecting both the exclusivity and the perceived quality of the product. Conversely, if the target market is price-sensitive, the company may need to set a lower price to remain competitive and attract buyers. While other factors such as brand loyalty, production costs, and competition do influence pricing strategies, they operate within the constraints defined by the target market. Brand loyalty can allow a business to charge higher prices if consumers are willing to pay more for a familiar brand. Production costs set a minimum price limit to ensure profitability. Competition keeps prices in check; if similar products are available at lower prices, the business must consider the target market's price sensitivity. However, the foundational determinant of the highest possible price is ultimately grounded in the characteristics and expectations of the target market.