Cost-plus pricing may be a reasonable way to determine price when
A)marginal cost and average fixed cost are roughly equal.
B)marginal cost and average cost are about the same.
C)marginal cost differs significantly from average cost.
D)marginal cost is very low.

Question

Quizplus · Accepted Answer

Cost-plus pricing works best when marginal cost and average cost are similar because it ensures that the business is covering its costs and making a profit without pricing the product too high or too low. If marginal cost differs significantly from average cost or is very low, then cost-plus pricing may result in overpricing the product and losing sales.

Cost-Plus Pricing May Be a Reasonable Way to Determine Price