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

question 252

Multiple Choice

Which of the following is not an advantage 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:

Midpoint Formula

A mathematical method used to calculate the average or midpoint of two points on a line, often used in economics to find the elasticity of demand.

Resource Costs

The expenses associated with the acquisition and use of raw materials, labor, and other inputs required for the production of goods or services.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of demand to price changes.

Quantity Demanded

Refers to the total amount of a good or service that consumers are willing and able to purchase at a given price level in a specified time period.