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A distributor of parts for diesel engines sets the initial prices of the items that she sells so that the prices conform to a gross margin of 52 percent.
Problem (a) Describe the distinguishing difference between cost-based, competition-based, and customer-based methods of setting an initial price. Which of these three methods is this distributor using? Explain your answer.
Problem (b) Given the distributor's price-setting method, what would be her price for an item that costs her $24.00? Show your work.
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