Question

Ceramic Customs Co. requires a specific type of ceramic to make custom-made tiles. Since only one supplier makes that particular ceramic, the firm is forced to source all of its supplies from it. The firm tried negotiating the price at which it purchases the material, butfailed to get any reduction on the cost. This is because:
a. the supplier has more bargaining power than the firm.
b. the supply is unlimited.
c. the supply exceeds the demand.
d. the industry has barriers to entry

Answer 1

Answer:

a. The supplier has more bargaining power than the firm.

Explanation:

This is an example of one of Porters' five forces. The supplier has a monopoly and thus entertains a high market share. This means that the supplier has more bargaining power than the firm as if the firm wants the ceramic there are no alternative options available for the firm; however, if the firm does not want supplies, the supplier can find plenty of firms that may need the ceramic thus making supplier more powerful than the firm.

Hope that helps.