Projecting sales price changes 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 that is expected to operate near capacity for the near future.
B) A firm in a capital intensive industry in which excess capacity exists.
C) A firm operating in an industry that is expected to maintain its current production processes.
D) A firm operating in an industry that is transitioning from the introduction phase to the high growth phase of its life cycle.

Question

Quizplus · Accepted Answer

A firm in a capital intensive industry with excess capacity is likely facing intense price competition and cannot easily raise its prices without losing market share to competitors. The other three options suggest that the firm is either operating near or at capacity, maintaining current production processes, or experiencing growth, making it more able to increase prices.

Projecting Sales Price Changes Depends on Factors Specific to the Firm