When the costs of supplies increase in an industry, the cost leader:
A) may continue competing with rivals on the basis of product features.
B) will lose customers as a result of price increases.
C) will be unable to absorb higher costs because cost leaders operate on very narrow profit margins.
D) may be the only firm able to pay the higher prices and continue to earn average or above-average returns.

Question

Quizplus · Accepted Answer

A cost leader typically has a cost advantage over its competitors, allowing it to absorb higher costs better than others and maintain profitability.

When the Costs of Supplies Increase in an Industry, the Cost