Question

In forecasting revenue, projecting changes in future selling prices for a firm's products depends on factors specific to the firm and its industry that might affect demand and price elasticity. Which of the following companies would most likely not be able to increase prices in the near future?A. A firm in a capital-intensive industry in which excess capacity exists.B. A firm operating in an industry that is transitioning from the introduction phase to the high-growth phase of its life cycle.C. A firm operating in an industry that is expected to maintain its current production processes.D. A firm in a capital-intensive industry that is expected to operate near capacity

Answer 1

Answer:

The company that is most likely not be able to increase prices in near future is Option A: A firm in a capital-intensive industry in which excess capacity exists.

Explanation:

Capital intensive industry are the industries that require huge investments as they are ones which have big machinery and infrastructure. They make huge profits as well. Initially industrial progress was expensive and people faced many problems in their business in the late 19th century. The start up costs of these bug industries used to extremely high.

Excess capacity means a situation where the demand for the goods is less than productive capacity. Thus, Option A industries are very less likely to increase prices in near future as it has excess capacity.