Question

Suppose a firm manufactures chocolates. It sells the chocolates at ₹100 after considering the production cost. How will the final price change if the production cost increases?

[0.80 marks]

• A. It will become more than ₹100
• B. It will become less than ₹100
• C. It will remain at ₹100
• D. It will reduce by 10%

Answer 1

The correct option is A It will become more than ₹100

The pricing of products is important for its marketing. The price is influenced by the cost of producing, distributing, and selling the product. Ideally, a firm sets these costs as the minimum level or the floor price at which the product may be sold. Generally, marketing firms strive to cover all their costs before earning a margin of profit over and above the costs. So, if the production costs increase, the cost of the final product will also increase.