Johnson Petroleum Company Is Considering Pricing Its 5,000 Litre Petroleum

question 112

Multiple Choice

Johnson Petroleum Company is considering pricing its 5,000 litre petroleum tanks using either variable manufacturing or full product costs as the base.The variable cost base provides a prospective price of $2,800 and the full cost base provides a prospective price of $2,850.The difference between the two prices is

• A)the amount of profit to be included.
• B)due to the fact that the variable cost base must estimate all fixed costs, other variable costs, and desired profit while the full cost base must estimate only desired profit.
• C)known as price discrimination.
• D)caused by the inability of most companies to estimate fixed cost per unit with any degree of reliability.
• E)known as peak pricing.

---

Definitions:

Rival

An entity competing against another in the same market or field.

Rival

A term used in economics to describe a good or service that cannot be consumed by more than one person at the same time, meaning consumption by one person diminishes the ability of another to consume it.

Nonexcludable

A characteristic of a good where it is impossible, or highly costly, to prevent someone from using the good once it has been provided.

Marginal Private Benefits

The additional benefit received by consumers from consuming one more unit of a good or service.