Multiple Choice
When a producer chooses a channel strategy that does not involve any intermediaries, they are using:
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
In a competitive market, what is most likely to happen if rivalry among competing sellers decreases?
A
Consumer surplus will increase as sellers compete more aggressively.
B
The market will become more efficient and prices will fall.
C
The number of sellers in the market will increase.
D
Market prices will tend to rise due to reduced competition.
Verified step by step guidance1
Understand the concept of rivalry among sellers: In a competitive market, rivalry refers to how aggressively sellers compete with each other, often by lowering prices or improving products to attract consumers.
Recognize the effect of decreased rivalry: When rivalry among sellers decreases, sellers are less motivated to compete on price or quality, which can reduce the pressure to keep prices low.
Analyze the impact on market prices: With less competition, sellers may have more market power, allowing them to raise prices since consumers have fewer alternatives.
Consider the effect on consumer surplus: Consumer surplus typically decreases when prices rise because consumers pay more or buy less, reducing the benefit they receive from the market.
Summarize the overall market outcome: Reduced rivalry among sellers tends to lead to higher prices, lower consumer surplus, and potentially less efficient market outcomes, contrary to increased competition scenarios.
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