Question

1. Which of the following is consistent with the presence of destructive competition in a market?
   1. Low quality
   2. Low market price
   3. 0 profit
   4. All of the above

Answer 1

Zero profit is not the presence of destructive competition because if there is more competition then there is no benefit of charging the producer very highas a result of which the prophet levels go down to 0 and low quality is also not the presence of destructive competition because if there is low quality the producer will automatically have less market share and in order to gain more market share he will have to increase his quality

Therefore (a,c,d) are wrong

However Predatory pricing or low pricing strategy can be considered as destructive competition because if you have market power if you can price your product to low what happens is thatthis will force the competitors out of the market and that is the reason why such practices are actually prohibited in some countries

Therefore (b) is the answer to this question