Average-cost pricing
A) always results in a profit that is less than what was expected.
B) will work out as expected when the firm's actual average fixed cost per unit is what was estimated when prices were set.
C) sets the price at the point where average fixed cost is equal to average variable cost.
D) ignores variable costs.
E) is the only way to ensure that the firm will set a profitable price.

Question

Quizplus · Accepted Answer

Average-cost pricing seeks to set the price at the point where average total cost is equal to price. If the firm's actual average fixed cost per unit is what was estimated when prices were set, then the price set will work out as expected. However, if actual costs differ from estimates, the firm may end up with lower profits or losses. Therefore, option B is the most accurate statement.

Average-Cost Pricing