What is the fundamental error in the suggestion that prices be based on costs rather than on supply and demand?
A)This would be less efficient than basing prices on supply and demand.
B)People should be free to set whatever prices they prefer.
C)Supply and demand determine costs.
D)People cannot be compelled to base prices on costs.

Question

Quizplus · Accepted Answer

Costs are determined by supply and demand, so basing prices solely on costs would ignore the crucial factor of supply and demand in determining the value and market price of a good or service. Prices based solely on costs may not reflect the true value or demand for a good, leading to inefficiencies in the market. Additionally, costs can vary widely depending on factors such as location, technology, and labor costs, making it difficult to determine a universal "cost-based" price for a good or service.

What Is the Fundamental Error in the Suggestion That Prices