In the real world, very few screen printers produce Cabbage Patch dolls. That, however, is another column. This is exactly what it sounds like, and what was described so well by Joe Clark. You then sell it for exactly that price. In the classroom model of a mature market, all manufacturers produce identical products and have identical costs.
All potential customers have complete and instant knowledge of the marketplace.
Cost-plus pricing prevails. The student is then challenged to develop strategies to increase margins. Reducing costs is the safer route, but is obviously limited. That is in a classroom world which assumes you have a crystal ball and can predict exactly how much business you will find. It also assumes the mills, distributors and Father Nature himself will not throw you any curve balls.