Question

Which of the following is NOT a characteristic of cost-of-service pricing?

1) Prices are established based on fixed and variable costs of transportation
2) Prices vary based on volume and distance
3) Prices tend to rise as shipping distance increases
4) Carriers price their services at the highest levels the markets will bear

Answer 1

Cost-of-service pricing does not involve pricing services at the highest levels the markets will bear.

Step-by-step explanation:

Cost-of-service pricing is a method used by carriers to set prices for their transportation services. It involves considering both fixed and variable costs in determining the price. However, the characteristic that is NOT associated with cost-of-service pricing is option 4) Carriers price their services at the highest levels the markets will bear. Instead, cost-of-service pricing aims to cover costs and make a reasonable profit, rather than charging the highest possible price.