GMAT Critical Reasoning
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Source: OG
Level: 5
Which of the following best completes the passage below?
When the products of several competing suppliers are perceived by consumers to be essentially the same, classical economics predicts that price competition will reduce prices to the same minimal levels and all suppliers' profits to the same minimal levels. Therefore, if classical economics is true, and given suppliers' desire to make as much profit as possible, it should be expected that_____.
- A in a crowded market widely differing prices will be charged for products that are essentially the same as each other
- B as a market becomes less crowded as suppliers leave, the profits of the remaining suppliers will tend to decrease
- C each supplier in a crowded market will try to convince consumers that its product differs significantly from its competitors' products.
- D when consumers are unable to distinguish the products in a crowded market, consumers will judge that the higher-priced products are of higher quality
- E suppliers in crowded markets will have more incentive to reduce prices and thus increase sales than to introduce innovations that would distinguish their product from their competitors' products