Question

Puredairy is one of the many suppliers that sell eggs to retail customers. Because of the many sellers, price is the main determinant of market success. Which of the following statements about Puredairy is true?

A. Puredairy will be in a position to dictate terms with its customers.
B. Puredairy's customers have to deal with higher switching costs.
C. Puredairy faces powerful buyers in the retail market.
D. Puredairy has a strong control over the market.

Answer 1

Answer:

Hi there! The Answer is C.

Explanation:

Being one of many suppliers of eggs to retail customers, Puredairy faces a lot of competition. As the buyers have a lot of choice between sellers, they are likely to switch suppliers if Puredairy increases prices, giving the buyers power to switch buyers when needed. Puredairy can also establish higher switching costs to recover losses though this may be a disincentive for buyers to choose Puredairy as their supplier in favour of another seller with lower switching costs.