Profit maximizing pricing
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1. How would a manager use economic theory to maximize profit price for a service or product?
2. What is the process of target costing? How is target costing calculated?
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The response provides you a structured explanation of profit maximizing pricing, and target costing. It also gives you the relevant references.
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1.
You can say a manager can use economic theory to maximize profit price for a service or a product by setting his price so that his output is equal the profit maximizing point. The profit maximizing output is that level where the difference between total costs and total revenues is the maximum. Fixed costs occur only in the short run and are incurred by the business at any level of output. However, variable costs change with output and increase as more products are made. The point at which variable costs equal price the manager stops increasing the output.
Economic theory helps the manager to set profit maximizing price. From economic theory we know that at the output level at ...
Education
- BSc , University of Calcutta
- MBA, Eastern Institute for Integrated Learning in Management
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