Final answer:
The statement refers to conducting a cost-benefit analysis, which is critical in balancing manufacturing costs with the price of products offered to customers. Economies of scale play a crucial role in allowing companies to lower costs and offer competitive pricing strategies, which need to be carefully balanced to ensure a healthy market competition.
Step-by-step explanation:
The statement 'Must balance cost of providing low-priced products against costs of manufacturing' refers to the necessity for firms to conduct a cost-benefit analysis. This analysis helps businesses weigh the costs associated with manufacturing products against the benefits of selling them at low prices.
Often, companies seek to take advantage of economies of scale, where increased production leads to lower average costs per unit. This principle is evident in large retail stores such as Costco and Walmart, which operate on a scale that allows them to offer products at reduced prices. However, these benefits must be balanced against the pricing strategy, where setting prices too low may not cover manufacturing costs or could trigger harmful competition.
The competitive market provides numerous advantages including lower prices and innovation, but it's important for businesses to find an optimal balance. As competition increases and businesses grow through economies of scale, policymakers also face the challenge of deciding when to intervene to prevent the loss of competition, ensuring markets remain beneficial to consumers.