Question

The market for laundry detergents in a country has several​ players, each with a slightly differentiated product. Squeaky Clean​ Inc. produces and sells​ 20,000 tons of household laundry detergent in this market at a price of​ $4 per pack. Alex​ Dawson, the operations manager of the​ firm, thinks that a​ 50-cent increase in the price per pack of the laundry detergent will increase the​ firm's profits. The marketing​ manager, Rick​ Arnold, however, feels that an increase in price will adversely affect the demand for its product and profits will actually decline. Which of the​ following, if​ true, will strengthen​ Alex's argument?
a. Shares of Squeaky Clean are being actively traded in the stock market.b. Squeaky Clean has recently launched a new range of car washes.c. The current prices of most of Squeaky​ Clean's products are lower than the prices of competing brands.d. The demand for industrial detergents is likely to increase in the near future.e. A market survey shows that a close rival has now overtaken Squeaky Clean in quarterly sales.

Answer 1

Answer:

C) The current prices of most of Squeaky​ Clean's products are lower than the prices of competing brands.

Explanation:

If Squeaky laundry detergent is cheaper than its competition, then it should have certain room for increasing its price. They should be careful not to increase Squeaky's price above the competition since probably a significant part of their sales is due to its lower price. As long as Squeaky's price is still lower than its competition, its demand shouldn't be affected.