Firms have tried a number of different strategies to reduce the negative effects of competition on their ability to earn economic profits.Which of the following strategies is most desirable from the viewpoint of economic efficiency and consumer well being?

Question

Quizplus · Accepted Answer

Investment in research and development allows firms to differentiate their products from those of their competitors, thereby reducing the intensity of price competition. This leads to greater economic efficiency by increasing product variety and improving product quality. Ultimately, this benefits consumers by providing them with a wider range of products to choose from and improving the quality of the products they purchase. On the other hand, collusion, price leadership, and cartels involve anti-competitive behavior that reduces economic efficiency and harms consumers.

Firms Have Tried a Number of Different Strategies to Reduce