Suppose You Have Just Opened a Store to Sell Espresso

question 157

Multiple Choice

Suppose you have just opened a store to sell espresso machines.Both you and a competing store buy this machine from a manufacturer for $130 each.Your competitor who has a store of the same size as yours is currently selling about 10 machines a month at a price of $200 per machine.You expect to sell about 6 machines a month at a price of $220 per machine.If you lower your price, you expect to make a loss.Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?

• A)The competing store probably has a lower marginal cost of production.
• B)The competing store probably has a lower average variable cost of production.
• C)The competing store's goal is to maximize revenue and not profit.
• D)The competing store probably has a lower average cost because average fixed cost falls as output increases.

---

Definitions:

Human Genome Project

A collaborative international research effort aimed at mapping all the genes of the human species and understanding their functions.

Genes

Units of heredity made up of DNA that are responsible for determining the characteristics of organisms and are passed from parents to offspring.

Prop Roots

Supporting roots that grow above ground from the lower part of the stem, providing additional stability to certain plants.

Contractile Roots

Contractile roots are specialized plant roots that contract and pull the plant deeper into the soil, helping to adjust the plant’s depth in the soil for optimal growth.