A Low-Cost Leader Translates Its Low-Cost Advantage Over Rivals into Superior

question 4

Multiple Choice

A low-cost leader translates its low-cost advantage over rivals into superior profit performance by:

• A) cutting its price to levels significantly below the prices of rivals.
• B) either using its lower-cost edge to under-price competitors and attract price-sensitive buyers in great enough numbers to increase total profits or maintain the present price,and using the lower-cost edge to earn a higher profit margin on each unit sold,thereby raising total profits and overall return on investment.
• C) going all out to use its cost advantage to capture a dominant share of the market.
• D) spending heavily on advertising to promote its cost advantage and the fact that it charges the lowest prices in the industry it can,and then using this reputation for low prices to build very strong customer loyalty,gain repeat sales year after year,and earn sustained profits over the long term.
• E) out-producing rivals and thus having more units available to sell.

Comprehend the structure of corporate shares, including classes, treasury, issued, and outstanding shares.

Understand the processes and regulations related to the issuance of shares and stock options.

Identify the concepts related to stockholders' equity and its components.

Grasp the financial transactions involved in corporations, including nonmonetary exchanges and subscriptions.

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Definitions:

Product Demand

The desire and willingness of consumers to purchase a specific quantity of a good or service at a given price over a specific period.

Resource Prices

Costs associated with the inputs used in the production of goods and services, such as materials and labor.

Economic Profits

represent the difference between a firm's total revenues and its total costs, including both explicit and implicit costs, reflecting excess earnings over opportunity costs.

Purely Competitive

Describes a market structure characterized by many sellers and buyers, where no single entity has the power to influence the market price.