In a competitive market for airline fares, how does increased competition among airlines typically affect the prices that consumers pay for tickets?

• A. Prices become unpredictable and fluctuate randomly.
• B. Prices tend to increase because airlines have more costs to cover.
• C. Prices tend to decrease as airlines compete to attract more customers.
• D. Prices remain unchanged regardless of the level of competition.

Answer: (C)

Verified step by step guidance

1. Understand the nature of a competitive market: In a perfectly competitive market, many sellers offer similar products, and no single seller can influence the market price significantly.
2. Recognize that increased competition means more airlines are trying to attract customers by offering better deals or lower prices.
3. Recall the basic economic principle that when supply increases or competition intensifies, prices tend to decrease as sellers compete to attract buyers.
4. Consider that airlines will lower fares to gain market share, which leads to a downward pressure on prices.
5. Conclude that increased competition among airlines typically results in lower prices for consumers, as airlines compete to attract more customers.