Which of the Following Statements About a High Net Profit

question 4

Multiple Choice

Which of the following statements about a high net profit margin is FALSE?

• A)It demonstrates how effective your business is at converting sales into profit.
• B)It may mean that you are capitalizing on some competitive advantage that can provide your business with extra capacity and flexibility during the hard times.
• C)It may mean that you are keeping your operating expenses under control to leave an acceptable profit.
• D)It may mean that your business might need to take on debt to pay its expenses.

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Definitions:

Competing Producers

Entities or companies that are in the same market striving to gain market share by offering better products, price, or services.

Perfect Competition

A market structure characterized by a large number of small firms, identical products, and freedom of entry and exit, leading to price takers.

Barriers To Entry

Economic, procedural, or regulatory obstacles that prevent or deter new competitors from easily entering an industry or area of business.

Absolute Market Power

The ability of a single economic actor, or a group of actors, to control market prices, output, and/or the market entry of new competitors without external interference.