Charging a higher price per unit causes an increase in profits for the company because the selling price is larger than the variable cost.

Question

Quizplus · Accepted Answer

Simply charging a higher price per unit does not guarantee an increase in profits because it does not consider the potential decrease in quantity sold due to higher prices, nor does it account for fixed costs. Profit is determined by total revenue (price times quantity sold) minus total costs (fixed plus variable costs), and a higher price could reduce demand, potentially lowering total revenue and profits.

Charging a Higher Price Per Unit Causes an Increase in Profits