Multiple Choice
Suppose there are four gas stations in town, each selling identical gasoline and none has any control over the market price. Which market structure best describes this situation?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
In competitive markets, companies usually offer a product line instead of just one product to:
A
appeal to a broader range of consumer preferences
B
avoid government regulation
C
reduce production costs through specialization
D
increase barriers to entry for new competitors
Verified step by step guidance1
Understand the context: In competitive markets, firms often decide on their product strategy based on consumer demand and market competition.
Recall the concept of consumer preferences: Consumers have diverse tastes and needs, so offering a variety of products can attract more customers by meeting different preferences.
Evaluate each option: Avoiding government regulation is generally unrelated to product line decisions; reducing production costs through specialization usually involves focusing on fewer products, not more; increasing barriers to entry is more about strategic market control than product variety.
Identify the main economic rationale: Offering a product line helps firms appeal to a broader range of consumer preferences, which can increase market share and sales.
Conclude that the correct reason for offering a product line in competitive markets is to appeal to a broader range of consumer preferences.
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