For Which Reason Might You Incorrectly Conclude That an Idea

question 20

Multiple Choice

For which reason might you incorrectly conclude that an idea no other person has implemented is highly profitable?

• A) You've misjudged people's wants and constraints.
• B) You've miscalculated the trade-offs people face.
• C) You've misunderstood how people will respond to incentives.
• D) All of these might lead you to incorrectly believe an idea is profitable.

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Definitions:

Fixed Production Cost

The portion of total production costs that does not change with the level of output, including costs such as rent, salaries, and insurance.

Vertical Integration

The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales service.

Economies of Scale

The cost advantage that arises with increased output of a product, as the fixed costs are spread over more units of production.

Demand Pooling

A strategy used in supply chain management to reduce variability in demand by aggregating demand across different customers or markets.