What is the biggest risk of selling below cost for a long time?
Answer and explanation
Correct answer: The business may face continuous loss
When the selling price remains below the relevant cost, each unit may contribute a loss unless another justified source offsets it. Continuing this practice can consume working capital, weaken the ability to pay obligations, and threaten survival. Low pricing may sometimes be temporary and strategic, but it requires a clear plan and cannot guarantee higher profit or permanent customer growth.
Frequently asked questions
What is the correct answer to this question?
The business may face continuous loss
Why is this the correct answer?
When the selling price remains below the relevant cost, each unit may contribute a loss unless another justified source offsets it. Continuing this practice can consume working capital, weaken the ability to pay obligations, and threaten survival. Low pricing may sometimes be temporary and strategic, but it requires a clear plan and cannot guarantee higher profit or permanent customer growth.
Which subject and chapter does this question cover?
This is a Class 12 Business Studies question. Chapter: Marketing Management. Topic: Price.
