Peak-Load Pricing Is Typically Introduced When

question 41

Multiple Choice

Peak-load pricing is typically introduced when:

• A)there are several competing firms.
• B)resale of the product is relatively easy.
• C)production costs vary in different time periods.
• D)consumer demands are highly stable.

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Definitions:

Variable Cost

A cost that changes in proportion to the level of production or business activity.

Contribution Margin Ratio

The percentage of each sale that contributes to covering fixed costs after variable costs have been paid.

Fixed Costs

Costs that do not vary with production level, such as rent, insurance, and salaries of administrative staff.

Variable Costs

Expenses that change directly and proportionally with the level of production or sales volume, such as raw materials and direct labor.