A competitive environment penalizes the inefficient use of resources. All but one of the following statements addresses why competition is so important for an efficient outcome. Which statement is not true?
a. Competition drives the price closer to the marginal cost of production.
b. Consolidation leads to concentration of market power that allows providers to act like monopolists and price their products above marginal cost.
c. Competition forces firms to improve efficiency or lose profits.
d. More firms competing in a market means more substitutes, so consumers have more options, and their demand is less elastic.
d. More firms competing in a market means more substitutes, so consumers have more options, and their demand is less elastic.
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The income effect for an inferior good
A) is negative. B) is zero. C) is positive. D) could be negative, zero, or positive.
In rational expectations theory, the term "optimal forecast" is essentially synonymous with
A) correct forecast. B) the correct guess. C) the actual outcome. D) the best guess.