Question

Bison Autos and Sparrow Co. are automobile manufacturers that both incur $9,000 to manufacture a vehicle. Recent numbers indicate that the economic value created by Sparrow Co. is significantly higher than that created by Bison Autos.What does this difference indicate?

Answer 1

Sparrow Co's automobiles are premium brands that command premium prices

Step-by-step explanation:

The fact that both automobile makers incurs the same cost of $9,000 is just one of many factors to consider because the processes involved in manufacturing are not necessarily the same.

Besides,the level of workforce efficiency and the state of technology deployed are not necessarily the same.

It could also be that Sparrow Co. was able to achieve same level of cost with Bison Autos because it adopted modern cost reductions techniques such as Just-In Time which eliminates the need to keep inventory, thereby eliminating excessive costs of holding inventory.

All in all,Sparrow Co,could project itself as a maker of high-end brands and increase prices as appropriate.