4.1.5.8 Dynamics of Competition notes

What is likely to increase in firms due to competitive pressure in the long run?

• Market stagnation

• Monopoly power

• Productive and allocative efficiency

• Consumer exploitation

What can firms reinvest in the short run to increase dynamic efficiency?

• Supernormal profits

• Consumer surplus

• External investments

• Government subsidies

Why are goods and services likely to be of higher quality in a competitive market?

• Firms strive for consumer loyalty

• Lower production costs

• Increased monopoly power

• Decreased market share

What is a key focus in improving the quality of service in industries like banking?

• Innovating new products

• Expanding market reach

• Reducing operational costs

• Customer service

What does the process of creative destruction in a market economy typically lead to?

• Expansion of the economy's productive potential

• Decrease in consumer choices

• Reduction in technological advancements

• Increase in monopoly power

Which company is used as an example of creative destruction due to technological change?

• Netflix

• Apple

• Microsoft

• Amazon

What is a consequence of firms competing vigorously with each other?

• Guaranteed lower prices

• Potential exploitation of consumers

• Reduced innovation

• Stable market conditions

What can lead to the development of new products and markets according to the text?

• Consumer disinterest

• Decreased competition

• Government regulation

• Technological change

What happens to less productive firms in the process of creative destruction?

• They are forced to leave the market

• They increase their market share

• They gain monopoly power

• They reduce their operational costs

How does increased competition affect consumer prices in a market economy?

• Leads to significantly higher prices

• Prices tend to decrease

• No impact on prices

• Only luxury goods become cheaper