Which company product provides greatest value-created

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Reference no: EM1356887

Two firms, Alpha and Beta, are competing in a market in which consumer preferences are
identical. Alpha offers a product whose benefit B is equal to $75 per unit. Alpha's average
cost C is equal to $60 per unit, while Beta's average cost is equal to $50 per unit.
(5 points each)

a) Which firm's product provides the greatest value-created?

b) In an industry equilibrium in which the firms achieve consumer surplus parity, by what dollar amount will the profit margin, P - C, of the firm that creates the greatest amount of value exceed the profit margin of the firm that creates the smaller amount of value?

Reference no: EM1356887

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