When a firm has a relatively undifferentiated service compared to its competitors, price competition intensifies.Which of the following is NOT an example of price competition?
A)Increased number of competitors
B)Increased substitute offers
C)Decreased capacity in the industry
D)Increased surplus capacity in the industry
E)Wider distribution of the service

Question

Quizplus · Accepted Answer

Decreased capacity in the industry is not an example of price competition. It may lead to a decrease in supply and an increase in prices, but it is not a direct result of companies competing on price. The other options listed all relate to price competition in some way, such as increased competition, substitutes, and surplus capacity leading to lower prices. Wider distribution may also lead to price competition if companies are trying to attract new customers by offering lower prices.

When a Firm Has a Relatively Undifferentiated Service Compared to Its