Which situation is the best example of competition in an economic system?

• A. Several firms selling similar products and trying to attract customers by lowering prices
• B. A single company controlling the entire supply of a product
• C. The government setting the price for a product and limiting entry into the market
• D. Consumers having no choice but to buy from one supplier

Answer: (A)

Verified step by step guidance

1. Understand the concept of competition in an economic system: Competition occurs when multiple firms or sellers offer similar products or services and strive to attract customers, often by adjusting prices, quality, or other factors.
2. Analyze each option to see if it fits the definition of competition:
3. Option 1: Several firms selling similar products and trying to attract customers by lowering prices — this suggests multiple sellers competing for customers, which aligns with the concept of competition.
4. Option 2: A single company controlling the entire supply of a product — this describes a monopoly, where there is no competition because only one firm dominates the market.
5. Option 3: The government setting the price for a product and limiting entry into the market — this indicates government intervention and regulation, which restricts competition.
6. Option 4: Consumers having no choice but to buy from one supplier — this also describes a monopoly or lack of competition, as consumers cannot choose among different sellers.