All of the Following Are Disadvantages of Cost-Plus Pricing Except

question 103

Multiple Choice

All of the following are disadvantages of cost-plus pricing except

• A)It ignores the price elasticity of demand: for example, it may be possible to increase profits by raising or lowering price.
• B)If the industry comprises identical firms (with identical costs), markups could be consistent among firms leading to no one firm having a competitive edge in terms of price.
• C)Allocating and apportioning business overheads to individual products could be somewhat arbitrary.
• D)The business has less incentive to cut or control costs: if costs increase, then selling prices increase. Consequently, this might further erode a firm's competitiveness.

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