Average Cost Pricing
a pricing method in which a markup for profit is added to the average cost of production. See Cost-Plus Pricing. | ||||
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Average Cost Pricing definition was found in categories: Business & Finance(1) Encyclopedia(1)
Average Cost Pricing Definition from Business & Finance Dictionaries & Glossaries
| Raynet Business & Marketing Glossary |
Average Cost Pricing
basing the pricing policy across the average cost of a range of products.
basing the pricing policy across the average cost of a range of products.
Average Cost Pricing Definition from Encyclopedia Dictionaries & Glossaries
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Average cost pricing
Average cost pricing is one of the ways government regulate a monopoly market. Monopolists tend to produce less than the optimal quantity pushing the prices up. Government may use average cost pricing as a tool to regulate prices monopolists may charge.
Average cost pricing forces monopolists to reduce price to where the firm's average total cost (ATC) intersects the market demand curve. The effect on the market would be:
- Increase production and decrease price. - Increase social welfare (efficient resource allocation). - Generate a normal profit for monopolist (Price = ATC) *
- Increase production and decrease price. - Increase social welfare (efficient resource allocation). - Generate a normal profit for monopolist (Price = ATC) *
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