When a product is NOT differentiated and price competition prevails, then:
A)the sellers are not likely to earn economic profits.
B)barriers to entry will rise.
C)barriers to entry will fall.
D)the sellers are likely to earn high economic profits.

Question

Quizplus · Accepted Answer

In a market with no differentiation and price competition, buyers are likely to be very sensitive to changes in price. Therefore, sellers would have to cut prices to remain competitive, which would lower profit margins. As a result, sellers are unlikely to earn economic profits.

When a Product Is NOT Differentiated and Price Competition Prevails