Suppose You Have Just Opened a Store to Sell Espresso

question 74

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 incur 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 lower marginal cost of production.
• B)The competing store probably has a lower average variable cost of production.
• C)The competing store's goal is to maximise revenue and not profit.
• D)The competing store probably has a lower average cost because average fixed cost falls as output increases.

---

Definitions:

Involuntary Part-time Workers

Individuals who are working fewer hours than they desire or need, due to circumstances such as an inability to find full-time employment or cuts in work hours by their employer.

Previously Retired

Refers to individuals who had exited the workforce upon reaching the age or conditions for retirement but may have returned to work or active professional life.

Part-time Employees

Workers who are employed for fewer hours than those considered full-time, often with less stability and fewer benefits.

Deskilling Thesis

The argument that technological advancements and organizational changes result in the reduction of the skill level required for jobs, leading to a devaluation of workers' expertise and autonomy.