Though Large Firms Have the Knowledge and Resources to Utilize

question 153

Multiple Choice

Though large firms have the knowledge and resources to utilize a better pricing strategy, many choose to use cost-plus pricing.One reason for this is that

• A)large firms do not have to maximize their profits because they face little competition from other firms.
• B)there is less risk of violating antitrust laws if a cost-plus pricing strategy is used rather than a profit-maximizing pricing strategy.
• C)the additional revenue that would result from a profit-maximizing pricing strategy is an insignificant fraction of the firms' revenues.
• D)firms often adjust the markup they charge to reflect current demand.

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Definitions:

Outstanding Voting Shares

The total number of shares of a corporation that are held by shareholders and eligible to vote at shareholder meetings.

Fair Value

The market value of an asset or liability, based on the current price at which it can be sold or settled.

Unrealized Loss

A loss that results from holding an asset that has decreased in value, but the asset has not yet been sold.

Deferred Tax Asset

This asset arises when a company pays more taxes to the government than it currently owes in its financial statements, to be used for future tax relief.