13
QuizMultiple Choice

Microeconomics — Test

Question 13 • Personal Finance and Economics

Why is pure competition considered an unsustainable system?

Answer
A
Producers cannot make a profit if they keep dropping their prices.
B
Price differentiation is often too minimal to matter.
C
Consumers cannot distinguish between products.
D
Few barriers exist to entry, meaning that the market inevitably floods.

Explanation

Pure competition has few barriers to entry, so firms can enter easily when they see a chance to earn profits. As more producers enter, supply can grow and prices and profits fall, making the market difficult to sustain; this is why “few barriers exist to entry, meaning that the market inevitably floods” is the best choice.

AI-written and checked against the verified answer.

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