All of the following are disadvantages of cost-plus pricing except which one?
A)It ignores the price elasticity of demand: for example, it may be possible to increase profits by raising or lowering price.
B)If the industry comprises identical firms (with identical costs), markups could be consistent among firms leading to no one firm having a competitive edge in terms of price.
C)Allocating and apportioning business overheads to individual products could be somewhat arbitrary.
D)The business has less incentive to cut or control costs: if costs increase, then selling prices increase. Consequently, this might further erode a firm's competitiveness.

Question

Quizplus · Accepted Answer

This statement is not a disadvantage of cost-plus pricing, but rather a potential outcome if all firms in the industry have the same costs. The other three options are all valid disadvantages of using cost-plus pricing.

All of the Following Are Disadvantages of Cost-Plus Pricing Except