Setting Prices by Adding a "Reasonable" Markup to a Firm's

question 255

Multiple Choice

Setting prices by adding a "reasonable" markup to a firm's average cost is called:

• A)break-even pricing.
• B)add-on pricing.
• C)target-return pricing.
• D)average-cost pricing.
• E)marginal analysis.

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Definitions:

Competitive Price

The price point in a market where supply meets demand, often driven by competition among firms and considered the equilibrium price.

Monopoly Power

The ability of a single supplier to control market prices and exclude competition in a particular market.

Natural Monopolies

Industries where a single firm can supply a product or service to an entire market at a lower cost than two or more firms.

Marginal Cost

The financial outlay for manufacturing an additional unit of a product or service.