A firm's core strategy in a competitive market is largely determined by its ______.

• A. cost structure
• B. government subsidies
• C. ability to set market prices
• D. brand loyalty

Answer: (A)

Verified step by step guidance

1. Understand the context: In a perfectly competitive market, firms are price takers, meaning they cannot influence the market price and must accept it as given.
2. Recall that in such markets, firms compete primarily on efficiency and cost management rather than on price setting or brand loyalty, because products are typically homogeneous.
3. Recognize that the firm's core strategy focuses on minimizing costs to maximize profits since the market price is fixed externally.
4. Identify that 'cost structure' refers to the composition and behavior of a firm's costs, including fixed and variable costs, which directly affect its ability to compete effectively.
5. Conclude that among the options given, the firm's core strategy is largely determined by its cost structure, as this influences its competitiveness and profitability in a competitive market.