Under which of the following conditions would higher market share be most likely to produce higher profits?
A) when unit costs fall as market share increases
B) when unit costs increase as market share increases
C) when production volume drops as market share increases
D) when production volume increases as market share increases
E) when the company charges a break-even price

Question

Quizplus · Accepted Answer

When unit costs fall as market share increases, the company is able to produce and distribute goods and services at lower costs, which increases its profitability. This is because the cost of production is spread over a larger number of units, which reduces the per unit cost. With higher market share, companies are also likely to enjoy economies of scale and scope, which drive down production costs further, leading to higher profits.

Under Which of the Following Conditions Would Higher Market Share