When Will the Elimination of a Product Line Have No

question 87

Multiple Choice

When will the elimination of a product line have no effect on the company's overall profit?

• A) When the avoidable fixed costs equal the product line's contribution margin
• B) When the unavoidable fixed costs equal the product line's contribution margin
• C) When there are no fixed costs incurred by the product line
• D) When the product line contribution margin is negative

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Definitions:

Limit Pricing

Limit pricing is a strategy where prices are set lower than the short-term market equilibrium by a dominant player to deter new entrants into the market.

Price Leader

A company that has the dominant influence in setting the price levels for goods or services in a particular market, often because of its significant share of the market.

Entry of Firms

This term refers to the process by which new businesses enter into an industry, contributing to competition and potentially influencing market dynamics.

Price Leadership

A pricing strategy where one dominant firm in an industry sets the price for products or services, and other firms in the market follow suit.