"Average-cost pricing":
A) will result in losses if actual sales are much higher than expected.
B) might cause a firm to charge too high or too low a price--and reduce its profits.
C) usually assumes the firm will sell a larger quantity than the year before.
D) cannot be profitable--because it ignores demand.
E) All of the above.

Question

Quizplus · Accepted Answer

Average-cost pricing can result in a firm charging too high or too low a price, which can reduce its profitability. It doesn't consider demand, so if actual sales are much higher than expected, the firm may face losses. There is no assumption that the firm will sell a larger quantity than the year before. Therefore, option B is the correct choice.

"Average-Cost Pricing