What criticism does the textbook level against the cost-plus-markup theory of price setting?
A) The theory does not agree with what businessmen say about price setting.
B) The theory does not account for vastly different percentage markups on different products.
C) The theory implies firms will sometimes want to set prices below average cost per unit.
D) The theory ignores sunk costs.
E) All of the above.
B
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If the actual price were below the equilibrium price in the market for bread, a:
A) surplus would develop that cannot be eliminated over time. B) shortage would develop, which market forces would eliminate over time. C) surplus would develop, which market forces would eliminate over time. D) shortage would develop, which market forces would tend to exacerbate.
Which of the following is unlikely to occur as a result of a price support program?
A) A reduction in consumer surplus B) A reduction in producer surplus C) An increase in quantity purchased D) An economic cost to government E) Improved economic efficiency