Pricing to cover variable costs and some fixed costs as in the case of some automobile distributorships that sell below total costs is typical of which of the following pricing objectives ?
Correct answer: D. Survival
- A. current profit maximization
- B. product quality leadership
- C. Market share leadership
- D. Survival
Explanation
Pricing below total cost to cover variable costs and part of fixed costs is a survival objective, used when a firm is trying to remain operating during difficult conditions. Profit maximization and market-share leadership are distinct objectives, even though temporary low prices may sometimes support them.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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