Question

Barring special donations from an outside source, what price should a nonprofit place on goods for a community in need?

1) loss-leader price
2) break-even price
3) highest markdown price
4) lowest markup price

Answer 1

A nonprofit organization should aim for a break-even price when setting the price for goods, covering costs without seeking profit. This ensures sustainability and accessibility for the community in need. Prices facilitate the efficient allocation of resources in a free market by acting as signals of value.

Step-by-step explanation:

The question asks about the appropriate pricing strategy for a nonprofit organization providing goods to a community in need, absent of special donations. Nonprofits, unlike for-profit businesses, typically aim to serve their communities without necessarily seeking to make a profit. When pricing goods, an important factor for nonprofits is sustainability while ensuring accessibility to those in need. Considering the cost structure outlined in the question, a nonprofit would likely opt for a break-even price. This price would cover the cost of production, which includes ingredients, shop rent, oven cost, and workers' wages, but would not include a profit margin. The break-even price allows the organization to sustain its operations without generating additional revenue beyond covering costs.

Prices in a free market act as signals indicating the value of goods and services and help in the allocation of scarce resources. When prices are set at the market equilibrium where the price equals the marginal cost (P = MC), this results in an efficient allocation of resources, benefiting society overall as it suggests the social benefits of producing a good or service outweigh the social costs. However, for a nonprofit focusing on community service rather than profit, the guiding principle is to make goods accessible while ensuring organizational sustainability, leading them to set prices at a level where they can continue to operate without incurring losses.

Answer 2

A nonprofit should set the price of goods for a community in need at the break-even price, which covers the cost of production and expenses without making a profit.

Step-by-step explanation:

In pricing goods for a community in need, a nonprofit organization should consider the break-even price. This is the price that covers the cost of production and allows the nonprofit to cover its expenses without making a profit. By setting the price at the break-even point, the nonprofit can ensure that it is providing goods to the community at a reasonable cost while still covering its costs.