Question

Durable ceramics, inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. it has always competed on a cost leadership basis. most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. durable ceramics' next most-efficient competitor, cost-less ceramics, inc., earns average returns, whereas durable earns above-average returns. the commercial construction firms are putting pressure on durable to reduce its prices. if durable reduces its prices below those of cost-less's prices, it is likely that:a. both durable and cost-less will devise additional ways to become more efficient in their productionprocesses.b. durable will be unable to absorb the lower cost, and will go out of business.c. both cost-less and durable will go out of business, leaving the customers with fewer alternative sources oflow-cost tile.d. cost-less will go out of business, and durable will gain higher power over its customers.

Answer 1

Answer:

d. cost-less will go out of business, and durable will gain higher power over its customers.

Explanation:

Durable ceramics, inc will only reduce its prices if this is to its advantage. We live in a capitalist world where companies make decisions based on their own benefits. In this case, in order for Durable ceramics, inc to lower its prices and have no losses, it would expand its sales. In this way, Durable ceramics, inc would be able to capture customers from its competitors, and could make them go bankrupt.

Thus, we can conclude that if Durable ceramics, inc reduced its prices, Cost-Less would go out of business and Durable would gain greater power over its customers.