Circuit Inc

question 77

Multiple Choice

Circuit Inc.is a manufacturer of a broad range of consumer electronics products.These consumer products are all highly profitable.The firm also manufactures a low-cost component that is an essential differentiating feature for most of its consumer products.The costs to manufacture this component have risen sharply in recent months.Internal estimates now indicate the company is breaking even on the manufacture of this component.Which of the following is MOST likely?

• A) Circuit Inc.will likely continue to manufacture the component, even at a loss, due to low supplier power.
• B) Circuit Inc.will likely continue to manufacture the component, even at a loss, due to high strategic stakes.
• C) Circuit Inc.will likely discontinue manufacture of the component due to low strategic stakes.
• D) Circuit Inc.will likely discontinue manufacture of the component due to high supplier stakes.

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Definitions:

Economies of Scale

Cost advantages achieved when increasing production leads to lower fixed costs per unit.

Restrictive Health

Policies or practices designed to restrict or control the availability of medical treatments, procedures, or resources, often for regulatory or budgetary reasons.

Export Subsidies

financial support from governments to domestic companies for the purpose of promoting goods for export, aimed at increasing competitive advantage on the global stage.

Free Trade Agreement

A pact between two or more nations to reduce barriers to imports and exports among them by eliminating tariffs and import quotas.