Which of the following is a necessary condition for the presence of competition in a market?
A) government regulations that assure firms will make excess profits
B) suppliers that offer a homogeneous product
C) a price that always equals per-unit production costs
D) low barriers to entry into the market

Question

Quizplus · Accepted Answer

Low barriers to entry into the market are necessary for competition because they encourage new firms to enter the market and compete with existing firms. When there are low barriers to entry, it is easier for new firms to start producing and selling the same or similar products as existing firms, which increases competition and can lead to lower prices for consumers. Government regulations that assure firms will make excess profits (A) and a price that always equals per-unit production costs (C) do not encourage competition, as they do not create an environment in which firms are incentivized to lower prices and improve their products. Suppliers offering a homogeneous product (B) may increase competition, but it is not a necessary condition for competition to exist. Differentiated products can still face competition if barriers to entry are low.

Which of the Following Is a Necessary Condition for the Presence