Suppose You Have Just Opened a Store to Sell Espresso

question 261

Multiple Choice

Suppose you have just opened a store to sell espresso machines.Both you and a competing store buy this machine from a manufacturer for $130 each.Your competitor ,who has a store of the same size as yours, is currently selling about 10 machines a month at a price of $200 per machine.You expect to sell about 6 machines a month at a price of $220 per machine.If you lower your price, you expect to make a loss.Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?

• A)The competing store probably has a greater number of employees.
• B)The competing store probably has a lower average variable cost of production.
• C)The competing store's goal is to maximize revenue and not profit.
• D)The competing store probably has a lower average cost because average fixed cost falls as output increases.

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Definitions:

Technological Changes

Refers to advancements and innovations in technology that impact society, businesses, and individual practices by introducing new tools, processes, or methods.

Seven Major Life Changes

Loss, separation, relocation, a change in relationship, a change in direction, a change in health, and personal growth.

Force Field Analysis

A method used in change management to identify and evaluate the forces for and against a change, facilitating decision-making and strategy development.

Plan for the Change

A strategy or set of steps designed to successfully implement new policies, practices, or systems.