Which of the following tend to result from strong competitive rivalry in competitive markets?

• A. Higher barriers to entry
• B. Lower prices and increased efficiency
• C. Reduced consumer choice
• D. Decreased innovation

Answer: (B)

Verified step by step guidance

1. Understand the nature of competitive markets: In perfectly competitive markets, many firms compete with similar products, and no single firm can influence the market price significantly.
2. Recall the effects of strong competitive rivalry: When competition is intense, firms strive to attract consumers by improving their offerings and reducing costs.
3. Analyze the impact on prices: Strong competition typically drives prices down as firms try to undercut each other to gain market share.
4. Consider efficiency: To maintain profitability despite lower prices, firms often increase efficiency by optimizing production and reducing waste.
5. Evaluate other options: Higher barriers to entry, reduced consumer choice, and decreased innovation are generally not outcomes of strong competition; instead, competition tends to lower barriers, increase choices, and encourage innovation.