Final answer:
In product line pricing, management must decide on the price steps between the various products in a product line, making sure costs and desired profit margins are considered.
Step-by-step explanation:
The question is regarding product line pricing, which is a business concept where management must decide on the price steps between the various products in a line. These decisions are crucial as they impact consumer choices and the firm's profitability. When determining prices, companies need to consider both the cost of production and a desired profit margin. The cost includes expenses like raw materials, production facilities, rent, and wages, while the profit margin reflects the company's financial goals and the competitive landscape of the industry.
Companies also have to consider the market structure, which affects how much market power they have, product differentiation, and the ease of new firms entering the market. These factors combined influence the strategic pricing of products within a line to appeal to various target markets while maintaining profitability.