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Free response · 1.2 Markets and Competitive Advantage
Exam-style concept-application task: apply the topic to a new business scenario. Suggested time 12–13 minutes.
FRQ 3 — Concept application (3 points)
Summit Gear is one of six stores in a mountain town that rent skis to tourists. The skis the stores rent are the same brands and models, and all six charge about $45 a day. Summit Gear's owner, Dana, is considering two options: (1) buying an automated ski-tuning machine that would cut her cost per rental from $20 to $14, or (2) adding a free boot-fitting service with a 30-minute appointment, which rivals do not offer, and raising her price to $55.
(A) Identify ONE factor in the scenario that indicates the ski-rental market is highly competitive. 1 pt
(B) Explain how option (1) would allow Summit Gear to seek competitive advantage in this market. 1 pt
(C) Explain how option (2) represents a different competitive-advantage strategy from option (1), and identify ONE risk of option (2) given the competitiveness of the market. 1 pt