ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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See increased transaction costs
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See a lowering of overall consumers
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See more governmental regulation
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See more competition
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Detailed explanation-1: -The entry of a new competitor in a market tends to reduce the market prices. When there are more companies competing for the same market share, customers choose those with lower pricing, and the general price level goes down.
Detailed explanation-2: -Basic economic theory demonstrates that when firms have to compete for customers, it leads to lower prices, higher quality goods and services, greater variety, and more innovation.
Detailed explanation-3: -Market penetration occurs when a company penetrates a market in which current or similar products already exist. A way to achieve this is by gaining competitors’ customers (part of their market share).
Detailed explanation-4: -New competitors can easily enter your market when there are low entry costs, few economies of scale, no knowledge-intensity and little protection of key technologies. Write down the potential new entrants and the entry barriers of your market. The threat is high if there are no or a few entrance barriers.