Product-cost cross-subsidization ________.
A) exists when one overcosted product results in more than one other product being overcosted
B) means that if a company undercosts more than one of its products, it will overcost more than one of its other products
C) means that if a company undercosts one of its products, it will overcost at least one of its other products
D) exists only when one overcosted product results in all other products being overcosted

Question

Quizplus · Accepted Answer

Product-cost cross-subsidization means that if a company undercosts one of its products, it will overcost at least one of its other products. This is because the undercosted product is not generating enough revenue to cover its actual costs, so the company must make up for it by charging higher prices for other products, which results in overcosting those products. Option A, B, and D are all incorrect as they do not accurately describe the concept of product-cost cross-subsidization.

Product-Cost Cross-Subsidization ________