If a Firm Has No Extra Capacity and a Customer

question 109

Multiple Choice

If a firm has no extra capacity and a customer asks for a special order, what price is acceptable (assuming there are no relevant qualitative factors) ?

• A) The regular price because this order replaces regular business
• B) Only variable cost
• C) Variable cost plus average fixed cost
• D) Only the average fixed cost

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Definitions:

Legitimate Power

The authority derived from a position or role within an organization, typically associated with recognized and formal authority.

Coercive Power

The ability to compel or force someone to perform a certain action through threats or punishment.

Reward Power

The ability of an individual to influence others' behavior by controlling the distribution of rewards.

Expert Power

The influence and authority one possesses as a result of one's expertise, skills, or knowledge.