If an entrepreneur prices a product too low then what risk may occur?
Answer and explanation
Correct answer: The business may not be sustainable if costs are not recovered
A low price may attract customers, but the selling price must still cover relevant costs over time and support continued operations. If revenue is consistently below total cost, the enterprise may face losses, cash-flow problems, and inability to maintain quality or supply. Customers will not always be angry, competition will not automatically disappear, and quality does not rise by itself. Hence A is correct.
Frequently asked questions
What is the correct answer to this question?
The business may not be sustainable if costs are not recovered
Why is this the correct answer?
A low price may attract customers, but the selling price must still cover relevant costs over time and support continued operations. If revenue is consistently below total cost, the enterprise may face losses, cash-flow problems, and inability to maintain quality or supply. Customers will not always be angry, competition will not automatically disappear, and quality does not rise by itself. Hence A is correct.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Business, Trade and Commerce. Topic: Business Risk.
