Multiple Choice
In a competitive market, a response strategy requires suppliers to be selected primarily based on which of the following criteria?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
The rivalry among competing firms in a competitive market is generally a stronger competitive force when:
A
there are significant barriers to entry for new firms
B
firms have substantial market power and can set prices independently
C
the market demand is growing rapidly and all firms can easily expand sales
D
products offered by firms are very similar and buyers can easily switch between sellers
Verified step by step guidance1
Understand the concept of rivalry among competing firms: It refers to the intensity of competition within a market, which affects pricing, output, and profitability.
Recognize that rivalry tends to be stronger when products are very similar (homogeneous), because buyers can easily switch from one seller to another without losing value.
Analyze how barriers to entry affect rivalry: High barriers limit new entrants, which can reduce rivalry since fewer firms compete; low barriers increase rivalry by allowing more competitors.
Consider the role of market power: Firms with substantial market power can set prices independently, which often reduces rivalry because they face less competitive pressure.
Evaluate market demand growth: Rapidly growing demand can reduce rivalry temporarily, as firms can increase sales without directly competing for the same customers.
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