Question

Q2. A high profit margin firm, like Coke requires fewer unit sales, why?

Q3 If a profit appears for some reason under perfect competition, what happens to profit?

Q4. if the imperfect competition power is completely lost, then zero profit would return…then profit is not sustainable..example of firm that this happened to?___.

Answer all the questions, i will give u a thumb!

Answer 1

Question 2 coke has profit margin above 60% so even if sales volume is less good profit is achieved because profit depends on two factors sales volume and profit margin so volume is less and but profit margin is better good profit is achieved so return on equity and return on assets is good. company is measured by ROe return on equity and return

Question 3

If there is perfect competition then there are more sellers in market so bargaining power of buyers increases so customers demand low prices so prices comes down due to large supply and less demand. market prices are determined by demand and supply in markets if supply is more and demand is less so bargaining power of customers is higher so prices comes down and profit goes down. profit margin decrease.

Question 4

if competition increases mean imperfect competition reduces

so supply increases more as compared to demand so selling become problematic as more supply than demand so bargaining power of customers increase so attract customer company begin to more and more discounts such situations comes company start selling without profit so just sell due to high inventory in stock .This is due to intense competition so to retain market share company reduce prices and profit dries out completely. examples of mobile smartphones initially price of smartphones were higher when Chinese companies entered market prices reduced dramatically. Chinese believe in volume of sales.