Suppose You Have Just Opened a Store to Sell Espresso

question 261

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 greater number of employees.
• 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.

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Definitions:

Competitive Indicators

Metrics used to gauge a company's performance in relation to its competitors.

Global Economy

The interconnected and interdependent nature of the world's economies, characterized by global trade, investment, and cultural exchange.

Environmental Practices

Activities and policies implemented by individuals, businesses, or governments aimed at minimizing negative impacts on the natural environment.

Human Resource Planning

The process of predicting and planning for future HR needs to ensure the organization has the right number of employees with the right skills at the right time.