A new producer enters a market with a cheaper production method. Rivals cut prices and improve their products, although their profit margins fall. Which conclusion is best?
Only producers benefit because consumers pay for the improvements
Competition must increase every producer's profit
Consumers may gain from lower prices and innovation while existing producers face pressure on profits
The entrant has created a monopoly by charging less
28 exam-style questions on OCR GCSE Economics 2.5 Competition, covering 2.5.1 Why producers compete, 2.5.2 How competition affects price, 2.5.3 Economic impact of competition, and 2.5.4 Monopoly and oligopoly. Each one has a worked solution and a mark scheme showing where the marks go.