Chapter 2, Problem 6AA

To determine

To analyze the option best suited for the blank.

Explanation of Solution

Competition between the firms ensures that the consumers are not being exploited by a single firm.

A market can be perfectly competitive. In this, there are many buyers and sellers and the sellers are the price takers. Here, the market price is set by the forces of demand and supply.

A market can also be monopolistically competitive. Here, few big players operate in the market. Their products are differentiated on the basis of quality, packaging, advertisement etc.

Every player in the market is operating with the motive of earning profit.

Competition is usually the incentive, or motivation for business to lower prices.