A problem with using the price of a product similar to the intermediate good sold on the market is
a. the market price includes a margin above marginal cost
b. the product on the market may include costly features your downstream division does not use
c. the product on the market may be cheap because it is not as high of quality as your downstream division uses
d. all of the above
c
You might also like to view...
What is meant by terms of trade? How is it determined?
What will be an ideal response?
You have just opened a new Italian restaurant in your hometown where there are three other Italian restaurants
Your restaurant is doing a brisk business and you attribute your success to your distinctive northern Italian cuisine using locally grown organic produce. What is likely to happen to your business in the long run? A) If your success continues, you will be likely to establish a franchise and expand your market size. B) Your competitors are likely to change their menus to make their products more similar to yours. C) If you continue to maintain consistent quality, you will be able to earn profits indefinitely. D) Your success will invite others to open competing restaurants and ultimately your profits will be driven to zero.