Some Consumer Electronics Products Such as Plasma TVs, DVD Players

question 217

Multiple Choice

Some consumer electronics products such as plasma TVs, DVD players, and digital cameras, are introduced at very high prices but over time, their prices start falling (beyond what could be attributed to falling costs as companies take advantage of economies of scale and cheaper technologies) .Which of the following is the best explanation for this observation?

• A)More firms are likely to enter the consumer electronics market over time, forcing market prices down.
• B)Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait.
• C)Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods.
• D)After satisfying the demand for early adopters, firms lower price to attract the more price-sensitive consumers.

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Definitions:

Break-even Point

is the level of sales at which total revenue equals total costs, resulting in neither profit nor loss for the business.

Variable Expenses

Expenses that change in proportion with the level of business activity or output.

Selling Price

The amount of money charged for a product or service, which may include costs of production, distribution, and a markup for profit.

Contribution Margin

Contribution margin represents the amount by which sales revenue exceeds variable costs, indicating how much revenue is contributing to covering fixed costs and generating profit.