The big problem with average-cost pricing is that:
A) fixed costs are hard to estimate.
B) it ignores the firm's demand curve.
C) it doesn't consider the effect of variable costs.
D) there is no way to include a desired profit per unit.
E) None of the above is true.

Question

Quizplus · Accepted Answer

Average-cost pricing simply divides total costs by the quantity produced to determine the price per unit. This approach ignores the firm's demand curve and the price sensitivity of consumers. As a result, the firm may end up charging too much or too little for its products, leading to lost sales or lower profits.

The Big Problem with Average-Cost Pricing Is That