Question

Neutron Inc, is one of the leading electric car manufacturers in Northbay, a developing economy. Neutron's sales increased by more than 20% this year compared to the previous year, which started a debate within the company about whether the firm should increase prices.Among those in favor of a price hike is Eric Johnson, the operations head at Neutron. Eric is of the opinion that given the high demand for Neutron's car, the firm should increase price to improve profits. Mike Wilson, the CEO of the firm, however, feels that a price increase would adversely affect teh demand for Neutron's products because he thinks consumers in this industry are more price conscious than brand loyal. Which of the following, if true, will weaken the case for a price increase?
A.Workers at Neutron's manufacturing units demanding wage hikes.
B. The recent increase in fuel prices was very steep.
C. some of Neutron's competitors have recently announced price cuts.
D.Many people have emigrated to Northbay from neighboring countries in the recent past.
E.Neutron's physical capital depreciates at a rate of 3% every year.

Answer 1

Answer:

C) some of Neutron's competitors have recently announced price cuts.

Explanation:

If your competition is offering substitute products at a much lower price, then it is very likely that your customers will start buying their products from them.

Electric cars are substitute products with normal internal combustion cars, so if Neutron increases the price of their electric cars, probably many consumers will buy a car from the competition.