The Optimal Selling Price for a Product Depends

question 38

Multiple Choice

The optimal selling price for a product depends

• A) only on the variable cost per unit.
• B) only on the sensitivity of unit sales to changes in price.
• C) on the level of total fixed costs and the variable cost per unit.
• D) on the variable cost per unit and the sensitivity of unit sales to changes in price.

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Definitions:

Risk-averse

A characteristic of preferring to avoid loss over making a gain, typically by selecting the option with the smallest possible risk.

Expected Utility

A theory in economics that quantifies how choices are made when the outcomes are uncertain.

Utility

A measure of satisfaction or pleasure that individuals get from the consumption of goods and services.

Risk Premium

The extra return expected by investors for holding a risky asset over a risk-free one, serving as compensation for the additional risk.