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Question
Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year. Which one of the following is true?
a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer.
b. Companies pursuing Wholesome's business strategy are especially vulnerable to this risk.
c. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina.
d. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.
Answer
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