Firms that use cost-plus pricing should
A) use a higher markup on products with a relatively inelastic demand.
B) use a higher markup on products with a relatively elastic demand.
C) base their calculations on the historical average cost of the product.
D) apply the same markup on every product that they sell.

Question

Quizplus · Accepted Answer

Cost-plus pricing involves adding a specific markup to the cost of producing a product. Products with relatively inelastic demand can bear higher markups because consumers are less sensitive to price changes, thus firms can increase their profit margins on these products.

Firms That Use Cost-Plus Pricing Should