Asked by Bryce Bloomquist on May 08, 2024
Verified
Management wants to offer a "Thank You" sale to its customers by offering to sell additional units of a product at the lowest price possible without affecting their profits. The price management charges for these one-time sale units should be set equal to the:
A) Average variable cost.
B) Average total cost.
C) Average total revenue.
D) Marginal revenue.
E) Marginal cost.
Marginal Cost
The cost added by producing one additional unit of a product or service.
Average Total Cost
Calculated as the total cost of production (fixed plus variable costs) divided by the total output, indicating the average cost per unit produced.
Average Variable Cost
The total variable costs (costs that vary with production volume) divided by the quantity of output produced, representing the variable cost per unit.
- Digest the theory and importance of variable, fixed, and total production costs, and how they play a critical role in influencing business verdicts.
Verified Answer
KL
Komila LoonaMay 12, 2024
Final Answer :
E
Explanation :
To maintain profitability while offering a sale, the price should be set equal to the marginal cost. This ensures that the cost of producing one more unit is covered, without affecting overall profits.
Learning Objectives
- Digest the theory and importance of variable, fixed, and total production costs, and how they play a critical role in influencing business verdicts.