A town council relaxes rules that had limited the number of bicycle-repair businesses. Several new providers begin offering repairs to local residents.
Why might the arrival of these providers affect the decisions of existing firms?
It can reduce pressure on existing firms to cut costs because new firms divide the market
It can increase pressure on existing firms to cut costs to remain competitive
It can help existing firms lower costs by giving them a larger share of customers
It can give existing firms room to raise prices as more providers enter the market
104 exam-style questions on AQA GCSE Economics 2.3 How the government manages the economy, covering 2.3.1a Fiscal policy and income and expenditure, 2.3.1b Fiscal policy and government objectives, 2.3.1c The government budget, 2.3.2a The meaning of monetary policy, 2.3.2b Uses of monetary policy, 2.3.3a Supply-side policies and their trade-offs, 2.3.3b Using supply-side policies, and 2.3.4 Policies to correct positive and negative externalities. Each one has a worked solution and a mark scheme showing where the marks go.