If a Firm Practises Perfect Price Discrimination

question 3

Multiple Choice

If a firm practises perfect price discrimination,

• A)its marginal cost curve is horizontal.
• B)it will maximize total revenue.
• C)it does not produce the quantity at which marginal revenue equals marginal cost.
• D)it will produce the quantity at which the marginal revenue curve intersects the average total cost curve.
• E)it will produce the quantity at which the marginal cost curve intersects the demand curve.

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Definitions:

Constant Gross Margin Method

A pricing strategy where the gross margin percentage is kept constant despite variations in product costs.

Joint Cost Allocation

The process of assigning the cost of a production process that yields multiple products proportionally to those products.

Activity-Based Costing

A costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption.

Volume-Based Costing

A costing methodology that assigns costs based primarily on the volume of goods or services produced, such as in traditional absorption costing systems.