Which of the Following Is a Disadvantage of Cost Leadership

question 33

Multiple Choice

Which of the following is a disadvantage of cost leadership?

• A) The presence of a cost leader in an industry tends to discourage new firms from entering the business.
• B) Low prices for goods and services always lead to low customer base.
• C) Downplaying research and development can slow cost leaders' ability to respond to changes once they are detected.
• D) Cost leadership strategy makes companies vulnerable to price competition from rivals.
• E) Cost leadership strategy breaks down barriers to entry that protect the firm from new competition.

Identify efficient allocations of goods in exchange economies using the Edgeworth box and contract curve.

Understand the role and impact of substitutes and complements in consumer consumption patterns.

Apply the concept of marginal substitution rates in understanding consumer preferences and optimal allocations.

Recognize the effects of market interdependencies on general and partial equilibriums.

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Definitions:

Industry Supply

The aggregate production of goods or services that companies within a particular sector can and want to offer at different pricing points.

Pure Competition

A market structure characterized by a large number of small firms producing identical products, where no single company has pricing power and market entry and exit are relatively easy.

Long-Run Adjustments

Long-run adjustments are changes made by firms or industries in response to shifts in market conditions over a longer period, involving variations in production levels and the entry or exit of firms.

Market Price

The present cost at which a service or asset is available for purchase or sale in a specific market.