Strong brand and image can allow a firm to raise prices.

Strong brand and image can allow a firm to raise prices.

• A. Raise prices when the brand and image become strong
• B. Increase advertising
• C. Expand into new markets
• D. Cut production costs

Answer: (A)

Strong brand and image create perceived value and customer loyalty, so people are willing to pay more because they trust the quality and status the brand represents. When demand is less sensitive to price, a firm can raise prices without causing a big drop in quantity sold, improving margins. Other options focus on building awareness or growing sales in other ways, but they don’t directly leverage the brand’s value to justify higher prices. Cutting production costs helps margins, but it doesn’t capitalize on the brand’s price-taking power.

Strong brand and image create perceived value and customer loyalty, so people are willing to pay more because they trust the quality and status the brand represents. When demand is less sensitive to price, a firm can raise prices without causing a big drop in quantity sold, improving margins. Other options focus on building awareness or growing sales in other ways, but they don’t directly leverage the brand’s value to justify higher prices. Cutting production costs helps margins, but it doesn’t capitalize on the brand’s price-taking power.