| The Pricing Decision | Pricing Strategies | Cost-Based Pricing |
|---|---|---|
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What is the entity that has a high degree of market power and therefore the ability to set its own price (within reason)?
A Monopolist. Aka: A Price Maker
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What is the pricing strategy that is based on the costs of production?
Cost-Based Pricing Strategies
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What is full cost pricing?
When a business allocates the total fixed costs between all the products that are sold.
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What is a firm that operates in a highly competitive market, where barriers to entry are low?
A Price Taker
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What is cost-plus pricing?
Both Fixed and Variable Costs
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What are two ways to appropriate full cost pricing?
Appropriate indirect costs equally or appropriate indirect costs according to floor space.
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What is type of monopolist has 100 percent market share?
A Pure Monopolist
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What is the mark-up or profit margin?
The percentage or specified amount of profit the producer wishes to make.
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What is the pricing method that allocates overheads based on which department has incurred a proportion of the indirect costs?
Absorption Cost Pricing
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What is a monopoly protected from competition by the law in order to prevent wasteful competition?
A Legal Monopoly
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What is the pricing strategy that considers the direct or variable costs of any extra output?
Marginal Cost or Contribution Cost Pricing
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What are Indirect Costs/Overheads?
Costs that cannot be clearly related to the level of output of any single product?
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What is a monopoly that holds power over a specific region or location?
A Regional Monopoly
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What is the contribution of a product?
The amount left from the selling price after all direct costs of production have been accounted for. The contribution is the surplus used to pay the fixed or indirect costs of production.
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What are rent, advertising, legal expenses and staff salaries?
Indirect Costs/Overheads
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