A Low-Cost Leader Can Translate Its Low-Cost Advantage Over Rivals

question 43

Multiple Choice

A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by

• A)underpricing rivals and attracting quality-sensitive buyers in great enough numbers.
• B)maintaining the present price and using the lower-cost edge to earn a higher profit margin on each unit sold.
• 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 to build strong customer loyalty.
• E)outproducing rivals and thus having more available units for sale.

---

Definitions:

Assets

Resources owned or controlled by a business, expected to produce future economic benefits.

Profit Margin

A financial metric that measures the percentage of revenue remaining after all expenses have been deducted from sales.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets financed by its shareholders' equity.

Absolute Advantage

A condition in which a country, company, or individual can produce a good or service at a lower cost per unit than competitors using the same amount of resources.