A Firm Must Set a Price for the First Time

question 41

Multiple Choice

A firm must set a price for the first time when it develops a new product,when it introduces its regular product into a new distribution channel or geographical area,and when it ________.

• A) needs to increase bottom-line results
• B) raises prices due to cost escalation
• C) rolls out an improved product
• D) enters bids on new contract work
• E) changes styles

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Definitions:

Diminishing Returns

A principle stating that if one factor of production is increased while others are held constant, the output per unit of the variable factor will eventually decrease.

AVC

Average variable cost, which is the total variable cost divided by the quantity of output produced.

ATC

Stands for Average Total Cost, which is the total cost per unit of output produced.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance, remaining constant regardless of the business activity.