When should firms use cost-plus pricing? Cost-plus pricing may be the best way t

ID: 1124215 • Letter: W

Question

When should firms use cost-plus pricing? Cost-plus pricing may be the best way to determine the optimal price when

A. it is easy to estimate demand and demand is relatively elastic.

B. the price that will cause the quantity sold to be where marginal revenue is equal to marginal cost is substantially lower.

C. marginal and average cost are roughly equal and the firm has difficulty estimating its demand curve.

D. the government is enforcing antitrust laws strictly such that price discrimination is prohibited.

E. competition is strong in a weak economy with no barriers to entry.

option C

marginal and average cost are roughly equal and the firm has difficulty estimating its demand curve.

the above is the answer

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