Chapter 2, Problem 8AA

To determine

To analyze the option best suited for the blank.

Explanation of Solution

Competition between two or more firms ensure that the consumers are not exploited. Moreover, it also helps the firms maximize their profits. Hence, it’s a part of the capitalism.

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 important element of capitalism.