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Tidy Tidy
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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 make 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 maximize revenue and not profit.
D) The competing store probably has a lower average cost because average fixed cost falls as output increases.
Textbook 
Essentials of Economics

Essentials of Economics


Edition: 4th
Authors:
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Repeat after me: 'Calm down. Things are gonna be fine. Things are gonna be all great. Just relax.' Wink Face
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SmooothSmoooth
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8 years ago
Don't mention it Happy Dummy
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