Management Cannot Influence the Price of a New Product

question 36

Multiple Choice

Management cannot influence the price of a new product.The market price is $100 per unit.The estimated production cost is $30 per unit.The estimated nonproduction cost is $40 per unit.If the gross profit is 40 percent of the market price,what is the target cost of the new product?

• A) $30
• B) $40
• C) $60
• D) $70

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Definitions:

Open-market Operations

The buying and selling of government securities by a central bank to control the money supply and interest rates in the economy.

Friedman Rule

A monetary policy rule proposed by economist Milton Friedman, suggesting that the optimal nominal interest rate is zero to eliminate the opportunity cost of holding money.

Deflation

A decrease in the general price level of goods and services, often indicating an economic slowdown.

Inflation

The velocity at which the aggregate price level for goods and services elevates, thereby reducing purchasing capability.