Full cost pricing

Updated: Aug 20, 2021

The practice of setting prices so as to cover what average cost would be at a normal rate of production, plus a conventional mark-up. At times when output is low, actual average costs exceed those when output is normal, as fixed costs have to be spread over a lower output level. One argument for full cost pricing is that firms firequently have to quote a price for much of their output before they know what total output is going to be, and before they know some of their costs. Under these conditions full cost pricing eliminates some of the risk of pricing below cost.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.