What is the critical assumption when using target profit pricing?

Question

Quizplus · Accepted Answer

The critical assumption when using target profit pricing is that a higher average price will not cause the demand to fall. This is because the goal of target profit pricing is to set a price that will allow the company to reach its desired level of profit, while still being able to sell enough units to generate that profit. If the price is set too high and demand falls, the company will not be able to reach its target profit. Therefore, the best choice is D, as it reflects this critical assumption.

What Is the Critical Assumption When Using Target Profit Pricing