1. Which one of these is a benefit of the break-even analysis?
- analysis does take into account economies of scale
- this is a very easy way of showing how profit levels change with changes in output
- analysis assumes that all output is sold
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2. What is break even
- when total revenue is equal to total costs
- when total revenue is higher than total costs
- when total costs are higher than total total revenue
3. What is a margin of safety
- where sales can increase from their current level
- the amount by which sales can fall from their current level before reaching the break-even point
- A margin used to keep profit safe
4. What is meant by psychological Pricing
- This occurs when different prices are charged for the same good or service
- For example selling a product at £49.99 instead of £50 makes customers think of it as less than £50
- This is the method of pricing which considers the toal cost per unit and then adds on a percentage to arrive at a final price.
5. Define what is meant by Price Skimming
- this strategy uses a high price to enter the market. Even though the price is high, some people may still be eager to try a new product once sales from the group of people disappear the price of the product can decrease to attract new customers.
- this strategy uses a low price to enter the market & gain market share
- Some firms set their prices the same as their competitors
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