To set prices, businesses must price the physical product and all of its associated:

• A. value-added features that contribute to consumer willingness to pay
• B. government taxes
• C. production costs only
• D. market competitors' prices

Answer: (A)

Verified step by step guidance

1. Understand that when businesses set prices, they consider not only the physical product but also other factors that influence consumer willingness to pay.
2. Recognize that 'value-added features' refer to additional benefits or attributes of a product that enhance its appeal beyond the basic physical item, such as quality, brand reputation, or customer service.
3. Note that government taxes and production costs are important for determining the minimum price to cover expenses, but they do not directly increase consumer willingness to pay.
4. Consider that market competitors' prices influence pricing strategy through competition but are not part of the product's intrinsic value that consumers perceive.
5. Conclude that the correct pricing approach includes the physical product plus value-added features that contribute to consumer willingness to pay, as these features justify a higher price from the consumer's perspective.