Price competition with a product that is identical across sellers leads to an outcome of:
A)positive economic profits for the sellers.
B)zero economic profits for the sellers.
C)rising barriers to entry in the market.
D)falling barriers to entry in the market.

Question

Quizplus · Accepted Answer

When a product is identical across sellers and price competition exists, sellers are forced to lower their prices in order to sell their product. This leads to a situation where the price of the product eventually reaches the cost of production, resulting in zero economic profits for the sellers. This in turn does not affect the barriers to entry in the market, as they remain the same.

Price Competition with a Product That Is Identical Across Sellers