If a firm drops its price to attract customers and gain a greater market share:
A)net profit margin will increase
B)net profit margin will decrease
C)gross profit margin will increase
D)gross profit margin will decrease

Question

Quizplus · Accepted Answer

When a firm drops its price to attract customers and gain a greater market share, the gross profit margin will decrease. This is because the firm is sacrificing profit per unit in order to sell more units at a lower price. While this may increase overall revenue, it will decrease the profit margin on each individual sale.

If a Firm Drops Its Price to Attract Customers and Gain