Question

A key element of​ Smashburger's pricing strategy is determining price steps between its​ quarter-pound, one-third​ pound, and​ half-pound hamburgers. The practice of setting prices for different products offered by a company within a single category is known as​ __________.

A. product line pricing
B. ​optional-product pricing
C. segmented pricing
D. promotional pricing
E. dynamic pricing

Answer 1

A. product line pricing

Smashburger's strategy of pricing different sizes of hamburgers represents product line pricing, which includes production costs and desired profit to set prices, while also considering menu costs for price change decisions.

Step-by-step explanation:

The practice of setting prices for different products offered by a company within a single category, as demonstrated by Smashburger's strategy for pricing their quarter-pound, one-third pound, and half-pound hamburgers, is known as product line pricing. This strategy considers the cost of producing the product, including cost of ingredients, facilities, rent, and labor, along with the firm's desired profit.

Desired profit is influenced by the profit margins in the business. The sum of the production costs and desired profit determines the price the firm sets. Moreover, factors such as menu costs play a role in the frequency of price changes due to the resources required to implement price changes and the potential customer reaction to fluctuating prices.