The Optimal Markup on Variable Cost

question 12

Multiple Choice

The optimal markup on variable cost:

• A) increases as unit sales become more sensitive to price.
• B) decreases as unit sales become more sensitive to price.
• C) is not affected by the price sensitivity of a product's sales volume.
• D) is equal to [ed/(1 + ed)] + 1, where ed is the price elasticity of demand.

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Definitions:

Total Output

The total quantity of goods or services produced by an individual, firm, industry, or economy.

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The financial strategy of distributing investments across various assets to reduce risk and potentially increase returns.