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

The correct answer is option A.

Step-by-step explanation:

Competitive advantage refers to the situation where a business enjoys superiority over its rivals. The firm is either able to produce at a lower cost or provides more value at the same cost.

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.

Since StoreAll is producing at a lower cost, it will be able to outperform its rivals. This indicates that it has a competitive advantage.