Which of the Following Statements Is Correct

question 25

Multiple Choice

Which of the following statements is correct?

• A)The markup pricing rule that is derived from the rule for profit maximization can be used as a substitute for determining the profit-maximizing level of output by equating marginal revenue and marginal cost.
• B)It is reasonable to assume that a profit-maximizing firm will never operate in the inelastic portion of its demand curve.
• C)The ability of a profit-maximizing firm to mark up price above average cost is unaffected by the price elasticity of demand for the firm's output.
• D)The markup factor and the price elasticity of demand are positively related, i.e., as the price elasticity of demand increases, the markup factor that the profit-maximizing firm can apply to its marginal cost in setting price increases as well.

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Definitions:

AASB 140

The Australian Accounting Standards Board regulation relating to the accounting for investment property.

IAS 40

A standard issued by the International Accounting Standards Board related to the accounting for investment property.

AASB 116

An Australian Accounting Standards Board standard detailing the accounting treatment for property, plant, and equipment.

IAS 16

An International Accounting Standard that prescribes the accounting treatment for property, plant, and equipment including their recognition, determination of their carrying amounts, and the depreciation charges and impairment losses to be recognized in relation to them.