An Organization That Is Using the Product Differentiation Approach Would

question 50

Multiple Choice

An organization that is using the product differentiation approach would most likely do which of the following?

• A) focus on tight cost control to create a reputation of saving its customers money
• B) use innovative research and development and develop effective promotional campaigns to increase customer loyalty and charge higher prices
• C) provide products that are similar to competitors
• D) offer products at a lower cost than competitors

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Definitions:

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price in a given period.

Price Floor

A minimum legal price below which a product cannot be sold; to have an impact, a price floor must be set above the equilibrium price.

Surplus

A situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Substitution Effect

The economic concept that as prices rise (or incomes decrease), consumers will replace more expensive items with cheaper alternatives, holding utility constant.