Average-cost pricing works best in situations where demand conditions do not change a lot.

Question

Quizplus · Accepted Answer

Average-cost pricing is based on the assumption that the company will sell enough units to cover its costs and make a reasonable profit. This approach works best when demand conditions are stable, and the company can accurately predict how many units it will sell at a given price. If demand conditions are volatile, the company may have trouble setting a price that covers its costs and generates a profit, as price changes may not result in the expected changes in demand.

Average-Cost Pricing Works Best in Situations Where Demand Conditions Do