A firm can establish a sustainable competitive advantage over competitors if:

• A. it sets prices equal to marginal cost
• B. it operates in a perfectly competitive market
• C. it possesses resources that are valuable, rare, and difficult to imitate
• D. it follows the pricing strategies of its competitors

Answer: (C)

Verified step by step guidance

1. Understand the concept of sustainable competitive advantage: it refers to a firm's ability to maintain superior performance over competitors for a long period.
2. Recognize that setting prices equal to marginal cost and operating in a perfectly competitive market typically do not allow for sustainable competitive advantage because these conditions lead to zero economic profits in the long run.
3. Recall that sustainable competitive advantage arises when a firm possesses resources or capabilities that are valuable, rare, and difficult for competitors to imitate or substitute.
4. Analyze why following the pricing strategies of competitors does not create a sustainable advantage, as it implies reactive behavior rather than unique strengths.
5. Conclude that the correct condition for sustainable competitive advantage is having unique resources that meet the criteria of value, rarity, and inimitability.