Question

- 0061 362 370 380 395 120 130 140 QUESTION 29 15 Firms have a competitive advantage when a. They can deliver the same product benefits as their competitors but at a lower cost b. They can deliver superior product at a similar cost c. Both of the above d. None of the above QUESTION 30 A price elasticity of demand of -0.67 implies a. Demand is elastic O b. Demand is inelastic c. Demand is unitary elastic d. Demand is perfectly elastic QUESTION 31 All of these could be sources of economies of scale except a. A bottleneck procedure b. Investment in more efficient technology c. Discounts on bulk purchase of inputs d. Specialization

Answer 1

29. a. They can deliver the same product benefits as their competitors but at a lower cost.

A firm can achieve competitive advantage either

• by supplying an identical product or service at lower cost (cost leadership) or
• by supplying a product or service that is differentiated in such a way that the customer is willing to pay a premium price (differentiation).

30. b. Demand is inelastic.

If price elasticity of demand is less than 1, it is said to be inelastic.

Ed = (-) 0.67 (which is less than 1)

31. a. A bottleneck procedure

Bottleneck procedure refers to when increasing amounts of variable inputs must share a fixed input and fixity of some factor of production.