Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

• A. Changes in consumer preferences across the entire market
• B. General inflation rates in the economy
• C. The firm's unique management practices
• D. Government fiscal policy

Answer: (C)

Verified step by step guidance

1. Understand the concept of 'firm effects' in microeconomics: these are factors internal to the firm that influence its performance and competitive advantage.
2. Identify that changes in consumer preferences across the entire market are external market effects, not firm-specific effects.
3. Recognize that general inflation rates and government fiscal policy are macroeconomic factors affecting the entire economy, not unique to a single firm.
4. Focus on the firm's unique management practices, which are internal characteristics that can create a competitive advantage by improving efficiency, innovation, or strategy.
5. Conclude that among the options, the firm's unique management practices represent a firm effect impacting competitive advantage.