Question

The segments all drift to the lower-right section of the perceptual map. Why does this drift take place?

a. Customers want smaller and less expensive products.
b. Customers want reliable and affordable products.
c. Customers want smaller and faster products.
d. Customers want newer and faster products.
e. None of the above.

Answer 1

Firms are located at or close to the bottom of the long-run average cost curve due to efficiency, competition, and economies of scale.

Step-by-step explanation:

In most markets, firms will be located at or close to the bottom of the long-run average cost curve for several reasons:

1. **Efficiency**: Firms strive to minimize their production costs in order to maximize their profits. By operating at the bottom of the cost curve, firms can produce goods and services at the lowest possible cost.
2. **Competition**: In a competitive market, firms need to offer products at competitive prices to attract customers. By operating at the bottom of the cost curve, firms can offer lower prices, which can help them gain a competitive advantage.
3. **Economies of Scale**: The long-run average cost curve depicts the relationship between the level of output and the average cost per unit. As firms increase their production volume, they can take advantage of economies of scale, which result in lower average costs.

Therefore, locating at or close to the bottom of the long-run average cost curve allows firms to be efficient, competitive, and benefit from economies of scale.