Which of the following is one way a company can translate a low cost advantage over rivals in a competitive market?

• A. By increasing advertising expenditures to differentiate its product
• B. By raising prices above competitors to signal higher quality
• C. By lowering prices to attract more customers and increase market share
• D. By reducing output to create artificial scarcity

Answer: (C)

Verified step by step guidance

1. Understand the concept of a low cost advantage: it means the company can produce goods or services at a lower cost than its competitors.
2. Recognize that in a competitive market, firms with a cost advantage often use pricing strategies to leverage this advantage.
3. Analyze each option by considering how it relates to cost advantage: increasing advertising or raising prices typically do not directly use cost advantage to compete on price.
4. Lowering prices to attract more customers is a direct way to use a cost advantage, as the firm can afford to reduce prices while maintaining profitability.
5. Reducing output to create scarcity is more related to market power or monopoly strategies, not a direct use of cost advantage in competitive markets.