Which of the following is not an advantage cost-plus pricing?
A) It leads to profit maximization.
B) It could lead to price stability if the industry is made up of identical firms all using the same method of pricing.
C) It is an easy method to implement if a firm produces multiple products and has overhead costs that are difficult to allocate to a particular good.
D) It is easy to justify price increases when total costs of production increase.
Question 2
Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons?
A) because it takes far more skill and training to be a major league baseball player than to be a neurosurgeon
B) because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.
C) because the total value of baseball games is much higher than the total value of neurosurgery
D) because the supply of talented major league baseball players is relatively low compared to the supply of neurosurgeons. Therefore, major league baseball players exert far more market power than neurosurgeons.
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