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3. Competition as a dynamic process implies that individual firms in a market
a. seek to utilize a variety of techniques, such as product, style, and convenience of location, to win the dollar vote
of consumers, but they never use price to compete.
* b. use price competition as well as other forms of competition to gain the dollar votes of consumers.
c. produce a homogeneous product.
d. cooperate, attempting to establish a price and output structure so each firm can survive and continue to serve
the consumer.
4. What role do losses play in a competitive market?
a. They penalize a firm for producing a good that consumers value highly relative to its cost.
b. They signal that more resources are needed in this market.
c. They show firms that barriers to entry are high.
* d. They send a message that more value would be created if the resources were used to produce other goods.
Extension Activity: Money on the Move—An Economics Play
Have the students put on a play to show the multiplier effect on new economic investments. Have the students play different
characters. They may show creativity in their characters’ remarks, but be sure they get the economics right. Put the students in
the same numerical order as listed here.
1. Wal-Mart executive: Wal-Mart is building its first store in a new community. Explain why Wal-Mart is doing this. The
student should focus on profits.
2. Construction company owner: The company will build the Wal-Mart shopping center.
3. Subcontractors: They will build the plumbing and electrical infrastructure.
4. Construction company employees: They will be paid.
5. Store owner: She will have more business because more workers have more income. She will also have more competition.
6. Wal-Mart employee: He will have a job.
7. Employee of a competing business: If this business is not competitive, she may lose her job.
8. Consumer: She will have more goods at lower prices.
To take this further, you could draw the circular flow of economic activity on the board or on a transparency. This model
provides an overview of how households and businesses interact in the marketplace by exchanging goods and services,
productive resources, and money. You could start the circular flow with Wal-Mart selling a good to a consumer. For more
detailed information on the circular flow, see Economics in Action, National Council on Economic Education, 2003, Lesson 10.
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