A firm is experiencing an increase in variable costs. What can the firm do to maintain its profitability?
A) Increase its fixed costs to balance out its increased variable costs.
B) Decrease its fixed costs to break even sooner.
C) Raise its price to increase its contribution margin.
D) Lower its price to gain a greater market share.

Question

Quizplus · Accepted Answer

Raising its price can help increase the contribution margin, which can offset the increase in variable costs and help maintain profitability.

A Firm Is Experiencing an Increase in Variable Costs