If EZTrade pursues the low-cost approach, which of the following is mo

QUESTION

If EZTrade pursues the low-cost approach, which of the following is most likely to be true?

A) It will seek to take advantage of economies of scale.
B) It will attempt to win customers by providing more extensive customer support.
C) It will earn greater profits than it would have had it chosen another model.
D) It will prioritize efficiencies in purchasing and not efficiencies in logistics.
E) It will attempt to provide the widest possible selection of products.

ANSWER

Answer: A
Explanation: A) Making money at the low-cost game requires a large volume of sales, which in turn involves taking advantage of lower unit costs as the quantity supplied increases. So Choice A is a safe inference. Choice B is less likely for a low-cost provider because providing support costs money. Choices C and E are possible but not definite. For all we know, the low-cost model will fail, Choice C: Also, while some products might fit with the low-cost mission, some products (for example, luxury products) might not. Choice D: Low-cost players try for efficiency everywhere.