Lu Runs a Company That Manufactures Satellites for Commercial and Government

question 25

Multiple Choice

Lu runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Lu conclude?

• A) The manufacturer is likely to see little profit until the power of buyers improves.
• B) In this scenario, suppliers are likely to create and sell effective substitutes.
• C) This firm is an example of near-perfect competition.
• D) The company is likely to be very profitable as long as the threat to entry is low.

---

Definitions:

Marginal Returns

Marginal Returns refer to the additional output or benefit received from increasing one unit of a particular input while keeping other inputs constant.

Marginal Cost

The incremental cost associated with the production of an extra unit of a product or service.

Marginal Cost Curve

A curve that displays the additional cost associated with producing one more unit of output, typically showing how marginal cost changes with changes in production volume.

Total Cost Curve

A graph that shows the total cost incurred by a firm in the production of goods or services at different levels of output.