Which of the following factors determine a firm's competitive advantage in a competitive market?

• A. Uniform product quality across all firms
• B. Perfect information for all consumers
• C. Government-imposed price controls
• D. Lower production costs compared to rivals

Answer: (D)

Verified step by step guidance

1. Understand the concept of competitive advantage: It refers to a firm's ability to produce goods or services at a lower cost or with better quality than its competitors, allowing it to earn higher profits or gain market share.
2. Analyze the role of uniform product quality: If all firms offer the same product quality, this factor does not create an advantage for any single firm because consumers see no difference between products.
3. Consider perfect information for consumers: When all consumers have perfect information, they can make fully informed choices, which tends to level the playing field among firms rather than giving one a competitive edge.
4. Evaluate government-imposed price controls: Price controls limit the prices firms can charge, which can restrict profits but do not inherently provide a competitive advantage to any particular firm.
5. Identify the key factor for competitive advantage: Lower production costs compared to rivals allow a firm to offer goods at lower prices or enjoy higher margins, which is the primary source of competitive advantage in a competitive market.