A Disadvantage of Pursuing a Low-Cost Strategy Is That

question 62

Multiple Choice

A disadvantage of pursuing a low-cost strategy is that:

• A) it makes it difficult for firms to customize their product offerings .
• B) price wars make it hard to compete with differentiators.
• C) it costs more than a differentiation strategy because of the necessity of high capital investments.
• D) powerful buyers are a major threat.
• E) it reduces customer retention.

Comprehend the calculation and implications of the slope of isocost lines.

Understand the relationship between isoquants, isocost lines, and the firm's production costs.

Analyze the marginal rate of technical substitution and its significance.

Recognize the geometric representation of production costs, including total cost, on graphs.

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Definitions:

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, reflecting surplus value created in productive activities.

Mutual Interdependence

A situation in oligopoly markets where the actions of one firm significantly affect the outcomes and decisions of other competing firms.

Pricing Strategy

The approach a business takes to setting the price of its products or services, influenced by costs, competition, market demand, and other factors.

Kinked Demand

A market situation where a firm’s demand curve has a distinct bend, reflecting different elasticity above and below the market price.