How does competition benefit consumers in a free enterprise system?

• A. It leads to higher prices
• B. It decreases product variety
• C. It results in better quality products and lower prices
• D. It limits consumer choices

Answer: (C)

In a free enterprise system, competition plays a crucial role in benefiting consumers primarily through the enhancement of product quality and the reduction of prices. When multiple businesses compete for the same customers, they are incentivized to improve their products and services to attract buyers. This drive leads to innovation and better quality offerings, as companies strive to stand out in the marketplace.

Furthermore, competition creates pressure on companies to keep prices reasonable. If one company sets its prices too high, consumers can easily switch to a competing firm that offers a similar product at a lower price. This dynamic encourages businesses to find efficient ways to operate, reduce costs, and ultimately offer lower prices. As a result, consumers enjoy the dual benefits of higher-quality products and more affordable prices, making competition a vital component of the free enterprise system's overall effectiveness.