Ever-Improving Levels of Efficiency Enhance Profit Margins for a Cost-Leader

question 4

Multiple Choice

Ever-improving levels of efficiency enhance profit margins for a cost-leader. This effects which of the five forces of industry structure most directly?

• A)potential entrants
• B)substitutes
• C)buyer power
• D)supplier power

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Definitions:

Less Elastic

Describes a situation where demand or supply is relatively unresponsive to changes in price.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in GDP, income, employment, and trade.

Limit Pricing

A strategy where a firm sets the price of its product low enough to deter new entrants into the market.

Game Theory

The study of how people behave in strategic situations in which individuals must take into account not only their own possible actions but also the possible reactions of others. Originally developed to analyze the best ways to play games like poker and chess.