How does competition benefit consumers?

Competition benefits consumers primarily by encouraging higher quality products. When businesses compete for customers, they strive to improve their offerings to attract more buyers. This drive for improvement can involve enhancing product features, performance, and overall quality. As companies innovate and diversify their products to stand out in a crowded market, consumers gain access to better goods and services.

In a competitive market, if one company raises its prices without increasing quality, consumers can switch to competitors offering better value. This need to retain customers incentivizes businesses to continuously enhance their products, resulting in overall better quality for consumers. Thus, competition fosters an environment where quality improvements are a key focus, significantly benefiting consumers.

The other options, which imply negative outcomes such as reduced product variety, higher prices, and limited choice, do not represent the primary advantages of competition in a healthy market scenario. Instead, competition typically leads to greater diversity and options for consumers, as firms strive to meet varying preferences and improve their market positions.