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I don't know how they are going to compete with Microsoft Surface(1366 x 768) with this Mini(1,024 x 768) without Retina Display.

Edit: Price difference - I see.

Price, app ecosystem.

Add to your list: build quality, touch drivers, and (big differentiator) LTE - not available on Surface, Nexus or Kindle Fire 7".

If those were equal, do you think Microfoft would catch up or overtake Apple?

No. With momentum as it is currently, MS would have to have a device 2x or better on every front.