Question : 41) If the selling price of a firm’s product $500 : 1387959

 

 

41) If the selling price of a firm’s product is $500 and the estimated average cost of producing this product is $400, what is the firm’s markup?

A) 15 percent

B) 20 percent

C) 25 percent

D) 40 percent

 

 

42) Which of the following is not an advantage of cost-plus pricing?

A) It is easy to calculate.

B) It requires little information.

C) If a firm is selling multiple products, it ensures that the firm’s prices will cover costs that are difficult to assign to one product.

D) It ensures that the firm will maximize its profits.

 

 

43) Which of the following firms is most likely to use cost-plus pricing?

A) A firm that makes one product.

B) A firm that sells one product and has a sizable research and development budget.

C) A firm that makes several products and has a sizable research and development budget, the cost of which cannot be easily assigned to each product.

D) A firm that makes many products but has a small research and development budget, the cost of which can be easily assigned to the different product lines.

 

44) Cost-plus pricing would be consistent with selecting the profit-maximizing price when

A) it results in a price that causes quantity sold to be where marginal revenue equals marginal cost.

B) a firm has no difficulty estimating its demand curve.

C) consumers value the product beyond its marginal cost.

D) the demand for the firm’s product is unit-elastic.

 

 

45) Cost-plus pricing may be a reasonable way to determine price when

A) marginal cost and average fixed cost are roughly equal.

B) marginal cost and average cost are about the same.

C) marginal cost differs significantly from average cost.

D) marginal cost is very low.

 

 

46) Book publishers often use a cost-plus pricing strategy. One reason for this is

A) most publishers do not hire economists who can determine the number of books they must sell to equate marginal cost and marginal revenue.

B) publishers do not want to incur the expense of determining the profit-maximizing strategy. They prefer cost-plus pricing because of its lower cost.

C) much of the cost of publishing textbooks is difficult to assign to any particular book.

D) bookstores, not publishers, ultimately determine how many books will be produced.

 

47) Cost-price pricing typically does not result in profit-maximization. As a result, economists have two views of cost-plus pricing. One of these views is

A) cost-plus pricing is more likely to lead to profit-maximization for large firms than for small firms.

B) cost-plus pricing is a good way to approximate the profit-maximizing price when marginal revenue or marginal cost is difficult to determine.

C) cost-plus pricing is more likely to lead to profit-maximization for monopolistically competitive firms than for oligopoly firms.

D) cost-plus pricing is more likely to result in profit-maximization the more elastic the firm’s demand curve is.

 

 

48) Even though it often does not result in profit maximization, some small firms use a cost-plus pricing strategy anyway because

A) it is easy to use.

B) they do not understand what marginal revenue and marginal cost mean.

C) it is expensive to hire an economist who can determine what the profit-maximizing price is.

D) they sell several products, each of which sells for a different price. The time and expense involved in finding the profit-maximizing price for each product are not worth the effort.

 

 

49) Though large firms have the knowledge and resources to utilize a better pricing strategy, many choose to use cost-plus pricing. One reason for this is that

A) large firms do not have to maximize their profits because they face little competition from other firms.

B) there is less risk of violating antitrust laws if a cost-plus pricing strategy is used rather than a profit-maximizing pricing strategy.

C) the additional revenue that would result from a profit-maximizing pricing strategy is an insignificant fraction of the firms’ revenues.

D) firms often adjust the markup they charge to reflect current demand.

 

50) Which of the following statements about two-part tariffs is false?

A) Because each individual has a different individual demand curve, if there is just one entrance fee, some consumers will be able to reap some consumer surplus.

B) The producer cannot capture the entire consumer surplus because the entrance fee might discourage some potential consumers even though they would have been willing to pay a lesser entrance fee.

C) Two-part tariff pricing allows a producer to capture the entire consumer surplus.

D) For two-part tariff pricing to be successful, the producer must be able to identify two distinct customer groups.

 

 

 

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