Even Though It Often Does Not Result in Profit Maximization

question 247

Multiple Choice

Even though it often does not result in profit maximization, some small firms use a cost-plus pricing strategy anyway because

• A)it is easy to use.
• B)they do not understand what marginal revenue and marginal cost mean.
• C)it is expensive to hire an economist who can determine what the profit-maximizing price is.
• D)they sell several products, each of which sells for a different price. The time and expense involved in finding the profit-maximizing price for each product are not worth the effort.

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Definitions:

Nonprofit Corporation

A legal entity organized for a public or social benefit, exempt from paying income tax on the money it earns.

Public Corporation

A company whose shares are publicly traded on the stock exchange and is subject to specific reporting and regulatory requirements.

Shareholders

Individuals or entities that own one or more shares of stock in a joint-stock company, giving them a right to a portion of the company's profits and a vote in certain company matters.

Quo Warranto

A legal proceeding used to challenge an individual's right to hold a public or corporate office.