Competitive Markets

Question 1

Competition

Answer 1

Rivalry that exists between firms when trying to sell goods to the same group of customers

Question 2

Barriers to entry

Answer 2

Obstacles that might discourage a firm from entering a market

Question 3

Innovative

Answer 3

Commercial exploitation of new inventions

Question 4

Product differentiation

Answer 4

Attempts by a firm to distinguish the product from that of a rival

Question 5

Competition leads to…

Answer 5

• charging prices that are acceptable to customers
• innovating by constantly reviewing and improving the product
• operate efficiently

Question 6

No competition leads to…

Answer 6

• less pressure to be efficient
• firms can charge a higher price
• less pressure to be innovative

Question 7

Competition + consumers (benefits)

Answer 7

lower prices - firms cant overcharge customers (if prices increase there will be loss of business
more choice - more alternative products (differentiation)
better quality - firms that offer poor goods or services will lose business

Question 8

Competition + consumers (disadvantages)

Answer 8

market uncertainty - firms that don’t survive will leave market (may inconvenience consumers)
lack of innovation - due to less profits, they cant invest

Question 9

Competition + economy (benefits)

Answer 9

• resources will be allocated more efficiently
• increased standard living due to new products, new production materials and new tech

Question 10

Competition + economy (disadvantages)

Answer 10

• resources may be wasted
• some factors of production are immobile; if a firm ceases to trade, unemployed tools and equipment will need to me reallocated