What economic strategy do fast-food companies use to maintain low prices?

Fast-food companies often achieve and maintain low prices through economies of scale in mass production and sourcing. By producing food in large quantities, these companies lower their per-unit costs. This is achieved because fixed costs, such as labor and equipment, can be spread across a larger volume of products, which reduces the overall cost per item. Additionally, large-scale operations allow fast-food companies to negotiate better deals with suppliers, securing lower prices for ingredients and materials due to their high purchasing power. This combination of streamlined production processes and bulk buying enables them to offer affordable menu options while still maintaining profit margins.

The other options, while potentially relevant to the fast-food industry, do not directly contribute to keeping prices low in the same fundamental way as economies of scale. Corporate mergers and acquisitions might focus on market share or competitive advantage rather than immediate cost reductions. High marketing budgets can enhance brand visibility and customer attraction, but they don’t fundamentally alter the cost structure of food production. Exclusive supplier agreements can provide certain advantages but are secondary to the broad impact of mass production efficiencies and large-scale sourcing.