Question

The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario?A. It has a competitive advantage in the industry.B. It has a competitive disadvantage in the industry.C. It has competitive parity with other firms in the industry.D. It has formed a strategic alliance with other firms in the industry.

Answer 1

Answer:

The correct answer is option A.

Explanation:

The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7.

StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle.

The store Inc manufacturers is able to produce at a lower cost than the other firms. This implies that it has a competitive advantage in the production of mineral water.

Competitive advantage refers to the conditions that help a firm outperform its competitors.