Which of the Following Is Not an Advantage of Cost-Plus

question 228

Multiple Choice

Which of the following is not an advantage of cost-plus pricing?

• A)It leads to profit maximization.
• B)It is an easy method to implement if a firm produces multiple products and has overhead costs that are difficult to allocate to a particular good.
• C)It could lead to price stability if the industry is made up of identical firms all using the same method of pricing.
• D)It is easy to justify price increases when total costs of production increase.

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Definitions:

Elastic Supply

A situation where the quantity supplied of a good changes significantly as the price changes.

Tax Burden

The total amount of tax that individuals, businesses, or other entities must pay to authorities, often expressed as a percentage of income or revenue.

Inelastic Demand

A situation where the demand for a good or service is not significantly changed by changes in price.

Elastic Supply

A situation where the quantity supplied of a good or service changes significantly in response to changes in price, indicating flexibility in the production process.