What is the primary purpose of nonprice competition in economics?

• A. To increase market prices through collusion
• B. To maximize profits by setting the highest possible price
• C. To reduce production costs by using cheaper inputs
• D. To differentiate products and attract customers without changing the price

Answer: (D)

Verified step by step guidance

1. Understand that nonprice competition refers to strategies used by firms to attract customers and increase market share without altering the price of the product.
2. Recognize that nonprice competition often involves differentiating products through quality, features, branding, advertising, or customer service.
3. Note that the goal of nonprice competition is to make a product more appealing compared to competitors' products, thereby attracting more customers.
4. Distinguish nonprice competition from price competition, which involves changing prices to gain market advantage.
5. Conclude that the primary purpose of nonprice competition is to differentiate products and attract customers without changing the price.