Author Question: All of the following are disadvantages of cost-plus pricing except A) Allocating and apportioning ... (Read 60 times)

bobthebuilder · **on:** Jun 29, 2018

All of the following are disadvantages of cost-plus pricing except

A) Allocating and apportioning business overheads to individual products could be somewhat arbitrary.
B) 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.
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.

Question 2

Refer to Figure 21-5. Crowding out of firm investment as a result of a budget deficit is illustrated by the movement from ________ in the graph above.

A) A to B B) C to A C) B to A D) B to C