critical assumption when using target profit pricing is that
A) a higher average price will not cause the demand for a product to fall.
B) a higher average price will cause the demand for a product to rise.
C) a higher average price will always cause the demand for a product to fall.
D) this form of pricing is extremely risky because profit is tied to the current value of the dollar.
E) being first is essential if you increase your average price since all of your competitors will do the same.

Question

Quizplus · Accepted Answer

The critical assumption when using target profit pricing is that a higher average price will not cause the demand for a product to fall. This assumption is necessary because if demand falls due to a higher price, then the company may not be able to achieve its target profit level. Therefore, it is important to carefully consider the relationship between price and demand before deciding on a target profit pricing strategy.

Critical Assumption When Using Target Profit Pricing Is That