The Big Problem with Average-Cost Pricing Is That

question 2

Multiple Choice

The big problem with average-cost pricing is that:

• A) fixed costs are hard to estimate.
• B) it ignores the firm's demand curve.
• C) it doesn't consider the effect of variable costs.
• D) there is no way to include a desired profit per unit.
• E) None of these alternatives is correct.

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Definitions:

Low Opportunity Cost

A situation where the cost of forgoing the next best alternative is relatively minimal.

Productive Activity

An action or process that leads to the creation of goods or services which have value and contribute to the economy.

Law of Comparative Advantage

The principle that countries gain by producing goods and services for which they have a lower opportunity cost compared to other countries.

Specialization

A strategy where individuals or entities focus on producing a limited range of goods or services, enhancing efficiency and expertise in their domain.