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29 March, 23:52

TrueDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. SW Storage Inc. is a competitor of TrueDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply

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  1. 30 March, 03:14
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    The multiple choices are missing:

    A. TrueDisk and SW Storage share differentiation parity.

    B. SW Storage has a competitive advantage over TrueDisk in terms of perceived value.

    C. TrueDisk creates a greater economic value than SW Storage.

    D. SW Storage is a cost leader when compared to TrueDisk.

    Option C is correct, TrueDisk creates a greater economic value than SW Storage.

    Explanation:

    Option A is wrong because differentiation parity is when a company is able to successfully defend the position that its company is of high value and charges a high price accordingly. This can be partially said of SW storage but it does not apply to TrueDisk.

    Competitive advantage is when a country or company has a lower opportunity cost in the production of a particular item, which is not applicable here, hence option B is wrong as well.

    Option C is correct because for the same product TrueDisk is charging a lower price, which implies higher economic benefit.

    A cost leader is company that sells a product at a loss so as to be able to entice consumers to buy other products that are highly priced.
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