Cost-price pricing typically does not result in profit-maximization. As a result, economists have two views of cost-plus pricing. One of these views is
A) cost-plus pricing is more likely to lead to profit-maximization for large firms than for small firms.
B) cost-plus pricing is a good way to approximate the profit-maximizing price when marginal revenue or marginal cost is difficult to determine.
C) cost-plus pricing is more likely to lead to profit-maximization for monopolistically competitive firms than for oligopoly firms.
D) cost-plus pricing is more likely to result in profit-maximization the more elastic the firm's demand curve is.

Question

Quizplus · Accepted Answer

Cost-plus pricing can be a practical approach when determining marginal revenue or marginal cost is challenging, as it provides a straightforward method to set prices that cover costs and include a profit margin.

Cost-Price Pricing Typically Does Not Result in Profit-Maximization