What Pricing Method Is Often Used Because of the Difficulty

question 216

Multiple Choice

What pricing method is often used because of the difficulty in establishing a benchmark of sales or investment to show how much of a firm's effort is needed to achieve the target?

• A)target return-on-investment pricing
• B)target return-on-sales pricing
• C)standard markup pricing
• D)penetration pricing
• E)loss-leader pricing

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Definitions:

Price Fixing

An agreement among competitors to set the price of a product or service, rather than allowing it to be determined through free market competition.

Reaction Function

Describes how one player's strategic decision in a game or market scenario is influenced by the decisions of other players, effectively mapping out a player's optimal responses.

Profit-maximizing Output

The level of production at which a firm's marginal cost equals its marginal revenue, leading to the highest possible profit.

Cournot Model

A model of oligopoly in economics where competing firms simultaneously and independently decide on the quantity of production, leading to a strategic interaction.