How Does Average Cost Affect Pricing and Competitiveness?
Average cost plays a crucial role in pricing strategy and competitiveness:
Competitive Pricing: Businesses with lower average costs can afford to set lower prices, making them more competitive in the market. Profit Margins: Firms that manage to keep their average costs low can enjoy higher profit margins, giving them a financial edge. Market Positioning: Companies can use their cost advantage to position themselves as cost leaders, attracting price-sensitive customers.