Asked by Rebecca Blissenden on Sep 24, 2024
Firms that face capacity constraints can increase output only up to the capacity,but no further.Therefore,firms
A) Should price to capacity as long as MR > MC
B) Should price to capacity as long as MR = MC
C) Should price to capacity as long as MR < MC
D) Should not take capacity into consideration in pricing decisions
Capacity Constraints
Limitations on the maximum output or production an organization can achieve due to current resources and operational capabilities.
Price to Capacity
The pricing strategy based on the production capacity of a company, often used in industries with significant fixed costs.
- Understand the importance of marginal revenue (MR) and marginal cost (MC) in determining prices.
- Acquire knowledge on strategies for pricing within settings restricted by capacity, aimed at enhancing revenue generation.
Learning Objectives
- Understand the importance of marginal revenue (MR) and marginal cost (MC) in determining prices.
- Acquire knowledge on strategies for pricing within settings restricted by capacity, aimed at enhancing revenue generation.