average cost pricing rule


Limitation on prices businesses charge to customers imposed by regulators. The amount a business can charge for its product or service is equal to the cost required to create that product or service. Limitation is generally placed on monopolies, legal or natural industries.

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You should try to use the average cost pricing rule so that you know you are setting a fair rate for your product.

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Although John wanted to price his cars at double the cost, the average cost pricing rule did not allow him to price them at such a high mark up.

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AVERAGE COST PRICING RULE A pricing strategy that regulators impose on certain BUSINESSES to limit the price they are able to charge consumers for its products/services equal to the costs necessary to create the product/service. This implies that businesses will set the unit price of a product relatively close to the average cost needed to produce it.

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average cost flow assumption average daily balance