What does the differential approach to pricing presume?
A)The price must be less than the differential cost of producing and selling the product.
B)The price must at least equal the differential cost of producing and selling the product.
C)The price must equal the market price.
D)The price must equal full costs plus a profit margin.

Question

Quizplus · Accepted Answer

The differential approach to pricing presumes that the price must at least equal the differential cost of producing and selling the product. Differential costs are the additional costs that are incurred to produce one additional unit or sell one additional unit of a product. By setting the price above the differential cost, the company ensures that it covers all its variable costs and makes a contribution to the fixed costs and profits. Therefore, option B is the correct answer.

What Does the Differential Approach to Pricing Presume