1. all of the following are disadvantages of cost-plus pricing except: a) if the

Question

1. all of the following are disadvantages of cost-plus pricing except:
a) if the industry comprises identical firms (with identical costs), markups could be consistent among firms leading to no one firm having a competitive edge in terms of price
b) allocating and apportioning business overheads to individual products could be somewhat abitrary
c) it ignores the price elasticity of demand: for example, it may be possible to increase profits by raising or lowering price
d) the business has less incentive to cut or control costs: if costs increase, then selling prices increase. consequently, this might further erode a firm's competitiveness

Explanation / Answer

Correct answer is ( C )

All of the following are disadvantages of cost-plus pricing except, it ignores the price elasticity of demand: for example, it may be possible to increase profits by raising or lowering price

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