A Critical Assumption When Using Target Profit Pricing Is That

question 77

Multiple Choice

A critical assumption when using target profit pricing is that

• A) a higher average price will not cause the demand for a product to fall.
• B) a higher average price will cause new competitors to join the industry.
• C) a higher average price will be offset by reductions in manufacturing costs.
• D) profit is tied to the current value of the dollar in relation to foreign currencies.
• E) any price increase will be followed quickly by similar moves from all of your competitors.

---

Definitions:

Present Value

The contemporary estimate of a future monetary sum or cash flows, evaluated with a given return rate.

Investment Projects

Initiatives or plans undertaken by individuals or organizations to allocate resources with the expectation of generating future profits.

Budget Set

The collection of all possible bundles of goods and services that a consumer can afford given their income and the prices of goods.

Interest Rate

The amount of a loan that is subject to interest charges for the borrower, typically expressed as an annual percentage of the current loan balance.