Multiple Choice
Which of the following is considered the most impersonal form of retailing in competitive markets?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
A sustainable competitive advantage in a competitive market is achieved when:
A
All firms in the market charge the same price for identical products.
B
A firm temporarily earns higher profits due to a short-term increase in demand.
C
Government regulations prevent new firms from entering the market.
D
A firm can consistently maintain lower costs or higher product differentiation than its rivals over time.
Verified step by step guidance1
Understand the concept of sustainable competitive advantage: it refers to a firm's ability to maintain an edge over competitors consistently over time, not just temporarily.
Recognize that in a perfectly competitive market, all firms sell identical products at the same price, so no firm can sustain higher profits or advantages.
Identify that temporary higher profits due to short-term demand changes do not constitute a sustainable advantage because they are not maintained over time.
Consider the role of barriers to entry, such as government regulations, which can limit competition but do not necessarily guarantee a sustainable competitive advantage unless the firm itself maintains unique strengths.
Conclude that a sustainable competitive advantage arises when a firm can consistently maintain either lower costs or higher product differentiation than its rivals, allowing it to outperform competitors over the long run.
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