Answer :
Final answer:
A company with a low-cost production strategy should regularly review plant and production costs to identify areas for cost reduction. It should experiment with production levels and monitor its effect on marginal revenue and marginal cost. Firms should also try to replace expensive inputs with cheaper ones in the long run.
Explanation:
When a company is pursuing a strategy to produce branded footwear at a low cost relative to any other rival firm, it should regularly review the plant and production cost benchmarking data in each year's footwear industry report to identify areas for further cost reduction. This is because having a low-cost production strategy requires businesses to continually find ways to lower their costs to maintain a competitive advantage.
Firms often lack the necessary data to draw a complete total cost curve for all levels of production. Hence they experiment with production levels and observe the effect on profits. They examine how changes in production affect marginal revenue and marginal cost. With yearly reviews, they can identify bottlenecks and inefficiencies in their production process for improvement.
In the long run, firms have the choice of their production technology, and all costs become variable. Firms will try to substitute expensive inputs with cheaper ones, to produce at the lowest possible long-run average cost. Selection of efficient production technology is also crucial. However, the decision should be based on which one has the lowest total cost.
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