2
QuizMultiple Choice

Case Study: Starting a Business — Unit test

Question 2 • * HSA 26-27 Economics

Why is pure competition considered an unsustainable system?

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

Explanation

In pure competition, firms face few barriers to entering the market. If existing firms earn profits, new producers can enter and increase the supply of the product, which can drive prices and profits down. This continual entry can make the market unstable or unsustainable; the best choice is “Few barriers exist to entry, meaning that the market inevitably floods.”

AI-written and checked against the verified answer.

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