If a firm has no extra capacity and a customer asks for a special order, what price is acceptable (assuming there are no relevant qualitative factors)?
A) The regular price because this order replaces regular business
B) Only variable cost
C) Variable cost plus average fixed cost
D) Only the average fixed cost

Question

Quizplus · Accepted Answer

Since the firm has no extra capacity, accepting the special order means it would replace regular business. Therefore, the acceptable price would be the regular price to ensure the firm does not lose revenue from its regular operations.

If a Firm Has No Extra Capacity and a Customer