Average Cost Pricing Rule

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Definition of 'Average Cost Pricing Rule'

A pricing strategy that regulators impose on certain businesses to limit the price they are able to charge consumers for its products/services equal to the costs necessary to create the product/service. This implies that businesses will set the unit price of a product relatively close to the average cost needed to produce it.
Investopedia Says

Investopedia explains 'Average Cost Pricing Rule'

This pricing method is often imposed on natural, or legal, monopolies. Certain industries (such as powerplants) benefit from monopolization, since large economies of scale can be achieved. 

However, allowing monopolies to be unregulated can produce economically harmful effects, such as price fixing. Since regulators usually allows the monopoly to charge a small price increase amount above of cost, average cost pricing looks to remedy this situation by allowing the monopoly to operate and earn a normal profit.
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'Average Cost Pricing Rule'

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    ... Short Position; 10.17 Plus Tick Rule; 10.18 Costs ... Introduction; 12.2 Diversification;
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  • CFA Level 1 Study Guide - Microeconomics - Marginal and Average ...

    http://www.investopedia.com/exam-guide/cfa-level-1/microeconomics/marginal-average-total-cost-curve.asp
    ... Modifying Output; 3.14 Marginal and Average Total Cost ... Capital; 11.9 Factors Affecting
    the Cost of Capital; ... 14.19 Pricing Bonds; 14.20 Duration; 14.21 International ...

  • CFA Level 1 Study Guide - Corporate Finance - The Cost of Capital ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/cost-of-capital.asp
    ... Modifying Output; 3.14 Marginal and Average Total Cost ... Capital; 11.9 Factors Affecting
    the Cost of Capital; ... 14.19 Pricing Bonds; 14.20 Duration; 14.21 International ...

  • CFA Level 1 Study Guide - Fixed Income Investments - Pricing Bonds ...

    http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/pricing-bonds.asp
    ... Modifying Output; 3.14 Marginal and Average Total Cost ... Capital; 11.9 Factors Affecting
    the Cost of Capital; ... 14.19 Pricing Bonds; 14.20 Duration; 14.21 International ...

  • CFA Level 1 Study Guide - Portfolio Management - The Capital Asset ...

    http://www.investopedia.com/exam-guide/cfa-level-1/portfolio-management/capm-capital-asset-pricing-model.asp
    ... Modifying Output; 3.14 Marginal and Average Total Cost ... Capital; 11.9 Factors Affecting
    the Cost of Capital; ... 14.19 Pricing Bonds; 14.20 Duration; 14.21 International ...

  • CFA Level 1 Study Guide - Corporate Finance - Marginal Cost of ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/marginal-cost-of-capital.asp
    ... Modifying Output; 3.14 Marginal and Average Total Cost ... Capital; 11.9 Factors Affecting
    the Cost of Capital; ... 14.19 Pricing Bonds; 14.20 Duration; 14.21 International ...

  • CFA Level 1 Study Guide - Quantitative Methods - Net Present Value ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/discounted-cash-flow-npv-irr.asp
    ... Modifying Output; 3.14 Marginal and Average Total Cost ... Capital; 11.9 Factors Affecting
    the Cost of Capital; ... 14.19 Pricing Bonds; 14.20 Duration; 14.21 International ...

  • Equity Valuation In Emerging Markets

    http://www.investopedia.com/articles/fundamental-analysis/11/evaluating-stocks-in-emerging-markets.asp
    ... risk premium to the firm's weighted average cost of capital ... There is hard and fast
    rule to choosing a ... in the context of the capital asset pricing model (CAPM ...

  • Equity Valuation In Good Times And Bad

    http://www.investopedia.com/articles/fundamental-analysis/09/equity-valuation-good-bad.asp
    ... volatility was, in part, exacerbated by an accounting rule. ... the present by the weighted
    average cost of capital ... more, see The Capital Asset Pricing Model: An ...

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