Final answer:
The average cost of marketing as a percentage of the selling price is most likely about A. 15 percent. This percentage allows for profitability provided the selling price exceeds the total costs of production and marketing.
Step-by-step explanation:
The question concerns the average cost of marketing as a percentage of the selling price. When we consider how a company makes a profit, it's essential to understand the relationship between the selling price, marketing costs, production costs, and profit margins. The average profit is determined by subtracting the average cost (which includes marketing costs) from the selling price of a product or service. If the selling price is significantly higher than the average cost, the company realizes a profit.
According to the principles of economics, if the average total cost, inclusive of marketing and other costs, is less than the market price, a firm will experience profits. These average costs, as a function of total output, often display a U-shaped curve on a graph. For a firm to sustain profitability, it must manage its average cost effectively against its selling price.
In the context of the given options for the average cost of marketing as a percentage of the selling price, no single definitive answer exists as it can vary greatly between industries and individual companies. However, marketing costs typically do not consume 70-80% or over 90% of the selling price. In many cases, a figure closer to 15% might be more realistic, although even this can fluctuate.
Therefore, considering the provided options and the nature of marketing costs, the most likely answer would be that the average cost of marketing is about 15 percent of the selling price. This percentage allows for a firm to potentially earn profits if the selling price remains above the combined costs of production, including marketing expenses.