Multiple Choice
Which of the following is most likely the result of healthy competition in a competitive market?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Why are stores such as Toys R Us and IKEA known as category killers in competitive markets?
A
Because they only sell products online and have no physical stores.
B
Because they dominate a specific product category by offering a wide selection at low prices, making it difficult for smaller competitors to survive.
C
Because they focus on luxury goods and exclusive brands.
D
Because they operate as monopolies in all retail sectors.
Verified step by step guidance1
Understand the concept of a 'category killer' in competitive markets: it refers to a retailer that dominates a specific product category by offering a wide variety of products and competitive prices.
Recognize that category killers attract a large number of customers due to their extensive selection and low prices, which increases their market power within that category.
Analyze how this dominance affects smaller competitors: smaller stores often cannot match the variety or prices, leading to reduced sales and potential exit from the market.
Note that category killers typically operate physical stores with large inventories, which contradicts the idea that they only sell products online.
Conclude that the defining characteristic of category killers like Toys R Us and IKEA is their ability to dominate a product category through wide selection and low prices, not through monopoly power or focus on luxury goods.
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