Question

An article in the Wall Street Journal gives the following explanation of how products were traditionally priced at​ Parker-Hannifin Corporation: ​"For as long as anyone at the​89-year-old company could​ recall, Parker used the same simple formula to determine prices of its​ 800,000 partslong dash—from​heat-resistant seals for jet engines to steel valves that hoist buckets on cherry pickers. Company managers would calculate how much it cost to make and deliver each product and add a flat percentage on​ top, usually aimed for about​ 35%. Many managers liked the method because it was straightforward...​ ." ​Source: Timothy​ Aeppel, "Changing the​ Formula: Seeking Perfect​ Prices, CEO Tears Up the​ Rules," Wall Street Journal​, March​ 27, 2007, p. A1. Is it likely that this system of pricing maximized the​ firm's profits? Briefly explain. This system of pricing likely

A. maximizes profits because it results in the same markup for products that are more price elastic and less price elastic.
B. maximizes profits because it is easy to identify the cost of producing a particular product.
C. does not maximize profits because production occurs where marginal revenue equals marginal cost.
D. does not maximize profits because it ignores consumer demand.
E. both a and b.

Answer 1

D. does not maximize profits because it ignores consumer demand.

Step-by-step explanation:

Price system, a means of organizing economic activity. It does this primarily by coordinating the decisions of consumers, producers, and owners of productive resources.