Final answer:
The statement is true; single-segment pricing sets the product's price based on costs of production and the desired profit, rather than the product's value to the customer over time.
Step-by-step explanation:
To answer the student's question, the statement is true. Single-segment pricing involves setting the price of a product based primarily on the costs of manufacturing and marketing the product and the desired profit margin the firm wishes to earn. This pricing strategy does not take into account the potential savings or value that customers may realize over the lifetime of the product. Essentially, when a firm sets prices by considering its cost of production and the profit it aims to achieve, it is following a cost-based pricing approach.
A firm needs to understand its cost structure by analyzing fixed and variable costs which eventually contribute to the average total cost, average variable cost, and marginal cost. Combining these cost perspectives with an analysis of sales and revenue becomes crucial in making final decisions about the profit-maximizing quantity to produce and the price to establish. Firms often analyze their cost structure from a long-run perspective to better strategize business decisions.