Cost-Price Pricing Typically Does Not Result in Profit-Maximization

question 26

Multiple Choice

Cost-price pricing typically does not result in profit-maximization. As a result, economists have two views of cost-plus pricing. One of these views is

• A) cost-plus pricing is more likely to lead to profit-maximization for large firms than for small firms.
• B) cost-plus pricing is a good way to approximate the profit-maximizing price when marginal revenue or marginal cost is difficult to determine.
• C) cost-plus pricing is more likely to lead to profit-maximization for monopolistically competitive firms than for oligopoly firms.
• D) cost-plus pricing is more likely to result in profit-maximization the more elastic the firm's demand curve is.

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Definitions:

Quantity Supplied

The level of goods or services available for sale by producers, who are willing and able to provide them, at a predetermined price over an agreed period.

Excess Supply

A market condition where the quantity of a good supplied is greater than the quantity demanded at the current price.

Equilibrium Price

The price at which the quantity of a good or service demanded meets the quantity supplied, resulting in market balance.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price level.