Question

While Fun Frames incurs a cost of $12 for a pair of eyeglasses, Highwire, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario?A) Fun Frames and Highwire have achieved differentiation parity.B) Fun Frames is a cost-leader when compared to Highwire.C) Fun Frames has created a greater economic value than Highwire.D) Highwire has a higher opportunity cost than Fun Frames.

Answer 1

Answer:

A) Fun Frames and Highwire have achieved differentiation parity.

Explanation:

Differentiation parity between two companies means that both companies can produce goods or services with the same perceived value even though their production costs may be different.

Fun Frames's production cost is higher than Highwire's, but both of their products have the same perceived value.