Future Business Leaders of America (FBLA) Marketing Practice Test

Why are new products often considered expensive?

1. High demand from consumers

2. Advertising costs

3. Development costs

4. Distribution fees

The correct answer is: Development costs

New products are often considered expensive primarily due to development costs. When a company creates a new product, it typically incurs significant expenses related to research and development (R&D), design, prototyping, and testing. These costs can be substantial, especially for innovative or technologically advanced products that require extensive testing and iteration before they can be brought to market. Investing in R&D not only involves direct financial outlays, such as materials and labor, but also indirect costs, such as the opportunity cost of researchers' time and the potential risk associated with product failure. Once these high development costs are spread across the initial production runs, the pricing of the product reflects these upfront investments, which can lead to higher prices for consumers upon launch.