Though Large Firms Have the Knowledge and Resources to Utilize

question 153

Multiple Choice

Though large firms have the knowledge and resources to utilize a better pricing strategy, many choose to use cost-plus pricing.One reason for this is that

• A)large firms do not have to maximize their profits because they face little competition from other firms.
• B)there is less risk of violating antitrust laws if a cost-plus pricing strategy is used rather than a profit-maximizing pricing strategy.
• C)the additional revenue that would result from a profit-maximizing pricing strategy is an insignificant fraction of the firms' revenues.
• D)firms often adjust the markup they charge to reflect current demand.

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Definitions:

Law of Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other inputs remain the same.

Average Product

The output per unit of input, calculated by dividing total product by the quantity of input.

Prosecuting Attorney

A legal representative responsible for presenting the case in a criminal trial against an individual accused of breaking the law.

Criminal Litigation

The process of bringing and conducting a lawsuit against someone charged with a criminal offense, encompassing the trial and any appeals.