According to the Product Life-Cycle Theory,the High Cost of U

question 48

Multiple Choice

According to the product life-cycle theory,the high cost of U.S.labor gave U.S.firms an incentive to:

• A)lower costs of services to offset a fall in demand.
• B)develop cost-saving process innovations.
• C)invite foreign direct investment in domestic industries.
• D)embrace and promote open market capitalism.

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Definitions:

Economic Inefficiency

A situation where resources are not optimally allocated, leading to waste or a loss of potential value in an economy.

Profit-maximizing Output

The level of production at which a firm achieves the highest possible profit, determined where marginal revenue equals marginal cost.

MC > P

A situation where the marginal cost of producing an additional unit is greater than the price at which it can be sold, suggesting that production should be decreased.

Pure Monopolist

A firm that is the sole seller of a product or service in a market, without any close substitutes, possessing significant market power.