When a good or service is supplied under competitive conditions, economic analysis indicates that with the passage of time, the quality of the product will
A) tend to improve, but its real price will generally rise.
B) tend to improve, and its real price will generally fall.
C) decline, and its real price will generally rise.
D) decline, and its real price will fall.

Question

Quizplus · Accepted Answer

Competition incentivizes suppliers to improve their product quality in order to differentiate themselves from their competitors and attract more customers. As suppliers improve their products, they are able to produce them more efficiently, leading to lower costs and ultimately lower prices for consumers. Therefore, over time, the quality of the product will tend to improve while its real price will generally fall.

When a Good or Service Is Supplied Under Competitive Conditions