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:

XYZ Corporation

A hypothetical or placeholder name often used to represent a generic, unspecified company or entity in discussions or examples.

Negotiable Instrument

A written promise or order to pay a specific sum of money that can be transferred to another holder.

Indorser

The person who signs and transfers a negotiable instrument, such as a check or promissory note, to another party.

Secondary Liability

The legal obligation to pay a debt if the primary obligor defaults, usually applied in cosigning contexts.