High Markups on a Product Could Lead to Low Profits

question 71

Multiple Choice

High markups on a product could lead to low profits when

• A) competitors have higher markups.
• B) there are no substitutes.
• C) demand is inelastic.
• D) sales dip due to high prices.
• E) supply is inelastic.

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Definitions:

Issuance Price

The price at which securities, such as stocks or bonds, are sold to the public or investors when they are first offered.

Market Rate

Market rate, or market interest rate, refers to the prevailing rate of interest that borrowers and lenders can expect to transact at, in the wider market.

Effective-interest Amortization

A method of calculating the amortized cost of a bond or loan by applying the effective interest rate to the outstanding balance.

Interest Payment

The payment made to a lender by a borrower in return for the use of borrowed money, typically represent a fixed percentage of the principal.