Consider the following statements about why prices are often based on product costs:
I. Companies sell many products and services, and cost-based approaches provide a simple and direct pricing method.
II. The cost of a product or service provides a lower limit or floor, below which price should not be set in the long run.
III. Determining a company's demand and marginal revenue curves is difficult, costly, and time consuming.
Which of the above statements is (are) true?
A) I only.
B) III only.
C) I and III.
D) II and III.
E) I, II, and III.

Question

Quizplus · Accepted Answer

All three statements are true reasons why prices are often based on product costs. Statement I is true because cost-based pricing offers a straightforward method for companies with a wide range of products. Statement II is true because pricing below cost in the long run is unsustainable for a business. Statement III is true because accurately determining demand and marginal revenue curves is complex and resource-intensive.

Consider the Following Statements About Why Prices Are Often Based