Which of the Following Statements Is Correct

question 25

Multiple Choice

Which of the following statements is correct?

• A)The markup pricing rule that is derived from the rule for profit maximization can be used as a substitute for determining the profit-maximizing level of output by equating marginal revenue and marginal cost.
• B)It is reasonable to assume that a profit-maximizing firm will never operate in the inelastic portion of its demand curve.
• C)The ability of a profit-maximizing firm to mark up price above average cost is unaffected by the price elasticity of demand for the firm's output.
• D)The markup factor and the price elasticity of demand are positively related, i.e., as the price elasticity of demand increases, the markup factor that the profit-maximizing firm can apply to its marginal cost in setting price increases as well.

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Definitions:

Horizontal Axis

The x-axis in a graph, typically used to represent the independent variable.

Vertical Axis

An imaginary line that runs up and down, perpendicular to the horizontal plane.

Relative Frequency Histogram

A graphical representation of the relative frequency of various outcomes in a data set, showing how often each value occurs relative to the total number of values.

Bar Width

In the context of a bar chart or histogram, it refers to the thickness or size of each bar, which can affect the chart's readability and interpretation.