Question

The threat of current direct competitors depends on the number and competitiveness of the firms in an industry. Discuss with the help of examples

Answer 1

The given statement is correct.

The threat of competition depends directly on the number of competitors in the market. More the competitors, more the competition.

For eg. In perfectly competitive markets like market of pens, as the number of sellers increases, the threat of competition to other producers will also increase. They will then try to look for options and ways to increase their own sales and beat the competition

Similarly, in monopolistic markets, since there is only one seller, he has no threat of competition and thus operates and sets prices as per his own demand.