Future Business Leaders of America (FBLA) Marketing Practice Test

Why is competition among businesses considered beneficial?

1. It decreases prices for consumers

2. It encourages product improvements

3. It limits market entry for new companies

4. It stabilizes market conditions

The correct answer is: It encourages product improvements

Competition among businesses is considered beneficial primarily because it encourages product improvements. When multiple companies compete for the same customers, they are motivated to enhance the quality of their products and services. This drive for improvement can manifest in various ways—through innovations, better features, upgraded technology, or improved customer service. As businesses strive to gain a competitive edge, they often invest in research and development to create new offerings or refine existing ones. This not only leads to a broader selection of products and services available to consumers but can also heighten overall industry standards. Customers benefit from having access to better and more diverse options, while businesses that invest in enhancements may see increased market share and customer loyalty. Other options may have merit, such as decreasing prices for consumers, but this is often a secondary effect of competition rather than the primary driver of its benefits. Limiting market entry for new companies and stabilizing market conditions generally do not align with the concept of competition, which thrives on the opposite idea—encouraging new entrants and fluctuating market dynamics.